ML20137D727

1996 Annual Rept for Union Electric

ML20137D727
Person / Time
Site:	Callaway
Issue date:	12/31/1996
From:	Schnell D UNION ELECTRIC CO.
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
ULNRC-3551, NUDOCS 9703260285
Download: ML20137D727 (46)

Text

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• 1901 Chouten Avenue

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Post Otnce Box 149 St. Louis. Missouri 63166 314 554-2650 Union March 18, 1997 " " ##'8'*"'#

Etscruic 2"s,,""" c"'*' '

E U.S. Nuclear Regulatory Commission Attn: Document Control Desk Mail Station F1-137 Washington, D.C. 20555-0001 Gentlemen: ULNRC-3551 DOCKET NUMBER 50-483 CALLAWAY PLANT ANNUAL FINANCIAL REPORT Transmitted herewith are twenty-five (25) copies of the Union Electric Company 1996 Annual Report.

This information is submitted in accordance with 10CFR50.71(b).

Very truly yours, O

Donald F. Schnell Y

WBM/mlo Attachment

/q 0C 9103260285 961231 l PDR ADOCK 05000483' I PDR ,.

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i cc: M. H. Fletcher .

Professional Nuclear Consulting, Inc. {

19041 Raines Drive '

Derwood, MD 20855-2432

{

Regional Administrator U.S. Nuclear Regulatory Commission  !

Region IV 611 Ryan Plaza Drive Suite 400 Arlington, TX 76011-8064 Senior Resident Inspector Callaway Resident Office U.S. Nuclear Regulatory Commission '

8201 NRC Road Steedman, MO 65077 Kristine M. Thomas (2) '

Office of' Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission 1 White Flint, North, Mail Stop 13E16 i 11555 Rockville Pike Rockville, MD 20852-2738 Manager, Electric Department Missouri Public Service Commission P.O. Box 360 Jefferson City, MO 65102

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1. j Table of Contents ABOUT THE COVER Highlights. .. . . . . .1 Expertise andexperience President's Letter. . . ... . . . .2 are keyto Urs success.

Ameren Corparation . . ... . .5 on the cover (upperright):

Jack Budak on overhead i Posm. .oned for Growth . . . .8 repairman andone of two Responsibility for Financial Statements and .

UEemployees featuredin Report ofIndependent Accountants. .16 the company's television Management's Discussion and Analysis . . . . .17 c:t ettising. Atthecomputer Statement ofIncome . . . .22 terminal: Roger Bartz one i Statement of Cash Flows . . .23 o/thepowermarketing Balance Sheet . . . .24 experts stoffing a24-hour Iung-Term Debt .26 desk where UEsells and Preferred Stock . . . .27 Purchasespower.

Statement of Retained Earnings and Selected Quarterly Information . .28 j Notes to Financial Statements .29 Operating Statistics. . .37 Selected Financial Information . .38 Directors and O$cers .40 Investor Information. .41 Statement of Purpose We are a business enterprise - dependent for success on the high quality and fair price ofour service; on the skill. courtesy and loyalty ofour employees: on the confidence of our investors; and on the ability of our management to forecast and provide for the energy requirements ofour area.

~ In the conduct of our business, we will render service of the highest quality to our customers - promptly, courteously and emciently - at the lowest prices consistent with paying fair wages and afTording job satisfaction and security to our employees; ,

providing modern facilities for our customers' expanding needs for energy service:

and paying a fair return to our investors who have provided the funds to make such ,

service possible, f As a private enterprise entrusted with an essential public service, we recognize our i

civic responsibihty in the communities we serve. We shall strive to advance the growth and welfare of these communities and shall participate in civic activities which ful611 that go.d...for we believe this is both good citizenship and good business.

l UNION Et:GRIC 1996 ANNUAL REPORT l

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l 1 liighligh t s f

l l t' Current har Change a

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{[%ErEndedDahinkef3C19 l Earnings per Common Share J $2.86! (3.1)%

1 l Earnings on Common Stock $291,627,000$

1 -

(3.1)

Dividends Paid per Common Share ':

i $2.51( 2.2 Common Stock Price-Year End . $38 %' (7.8)

Book %!ue per Common Share ' $23.06 1.5 l Property and Plant (net) $5,382,670,000 2.0

'Ibtal Operating Revenues $2,260,364,000 0.8 t

l Total Kilowatthour Sales 41,276,000,000 3.5 t

AB0ui UNION ELECTRIC l

i WW6WEM j J St. Louis-based Union Electric (NYSE:UEP) provides energy services to 1.3 million customers 5

l j in Missouri and Illinois. More than 95 percent of the company's $2.3 billion revenues flow l from electric sales, with the remainder from sales of natural gas. The company prides itself on

[ a long, successful tradition of cost containment, low rates, financial strength and continuous g l/ customer service improvements, as well as nine decades of uninterrupted cash dividend 1 l

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[ paymentstostockholders.

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rur,Vk 14 / _r-HcMlWE Dib N1996 We sold a record 41 billion kilowatthours, successfully launched our first non-utility service "h 'h" #' P 5"# *"'9" in the retail market and completed the scheduled refueling at our Callaway Nudear Plant in

/ union natnc Company record time. We announced UE's first statewide customer credit under our Missouri experi-  !

and GPSCO, a new mental alternative rate regulation plan for electric customers and shepherded our merger with registeredpublic utihty l

holding company, Ameren CIPSCO Incorporated (CIPSCO) through the initial stages of the regulatory process.

l Corporatiott willbecome theparent of UEand S l

Springfield, ///-based in 1997 we expect to buiid on our financial strength, offer more products, expand our Central //hnois Pubhc Service interchange business, bolster our key account service program and complete the merger. At Company (GPS). OPSis the same time, we will remain faithful to our history of core business growth, cost control, fair theprincipaloperating retums to stockholders and excellent service to customers.

company of GPSCO.

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A PRE 51 DENT'S l.ETTER ,

Drdwis Pad pei common shme Dividend Growth

$2.60 2m 2.e 2y1

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i I The combination of Union Electric and CIPSCO will create a new holding company, Ameren i

Corporation. The name, Ameren, reflects the geographic roots and core business of both i

companies - American cnergy. Based on the latest published figures, Ameren will be the nation's 14th largest electric utility in generating capacity and 19th largest in kilowatthour sales. I In addition to significant savings, the combination of these two financially strong, low-cost I  ;

energy providers means that over the long term, rates of each company will be lower than l they would twe been absent the merger. l The year 1997 will be a significant one for our industry. A far-sighted, rational and care- l fully planned approach to industry restructuring is critical. Unfortunately, some of the l )

proposals now before Congress call for sweeping deregulation over a short time frame, g with no provision for eliminating various inequities or for minimizing risk to customers and g investors. In addition, legislation offering customers a choice in energy providers is under g consideration in Illinois.

g industiy officials, induding the management of your company, are working at the federal j and state levels to ensure an equitable, thoughtful transition to a competitive marketplace. UE has paid cash We enter 1997 with continued enthusiasm for our company's prospects. We are opti- dividends eVery year mistic that the accomplishments of 1996 can be sustained and enhanced, and we are confi- since 1906 dent of our ability to manage the changes reshaping our industry.

That would not be possible without the committed, innovative, hard-working employees Union Hectric's uninter-of Union Electric. There is no better way to condude this letter than to recognize their efforts. ruptedrecordo/ cosh dividendpayments to l Finally, our thanks to you, our owners, for your support during the past year.

stockholders nowspans nine decades, and

1. indudes increasesin 11 i of thelost 12 years C. W. Mueller President and Chief Executive Officer February 10,1997 l

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} A PICTURE Or AMEREN CORPORATION l A top priority for managements of both companies is to in addition to other initiatives.

bring the merger between Union Electric Company and CIPSCO At this time, management expects the merger to be l Incorporated to completion. completed by the end of 1997.

The year marked one of great activity in working with regula- Once in place, the new parent company - Ameren Corporation tors, while teams from both companies created a structure and - will serve 1.5 million electric customers and 300,000 natural gas

, business processes for the merged organization. o;stomers in Missouriand lilinois.

} Throughout 1996, those teams worked to identify merger savings. Ameren's consolidated assets will total nearly $9 billion, and its We increased our gross merger savings estimate from $590 million generating capacity and kilowatthour sales will place the company to $759 million over the first 10 years of the merger. among the nation's top 20 investor owned utilities.

Cost savings will be realized through elimination of duplicate The combination of the two companies offers greater

! corporate and administrative services, including reduction of the potential for growth by capitalizing on both companies' financial 1

! combined staffs of Union Electric and CIPS by more than 300 strengths, low costs, strong customer relationships and expanded positions - largely through attrition. Savings will also result from market opportunities.

jointly dispatching power, realizing purchasing economies, and The charts on the following pages offer a picture of what is decreasing gas reserve margins and pipeline demand charges, soon to be your new company - Ameren Corporation.

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j \ \ Union Electric CIPS

( WisCONstN lGlerCOnnectiOn$ laterConneClion$

centralIllinois P(Mic Service Union Electnc f Assoodted Elecinc AEP(Indiana Michigan cooperatne Power)

IOWA /

" central & Southwest (Public centralEinois Light

- ServKe of oklahoma) CINergy(PsiEnergy)

) Otyof Colurabia(Mo) Oty Water Light & Power, Entergy (Entergy-Arkansas) SpringrK4d,il 3 Interstate Power Commonwealth Edison

( Kansas Gty Power & Light Winois MuniapalElectnc

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MidAmentan Energy Agency

" Paton Northern States Power Indiana MJniapalPower hA e St Joseph Ught & Power Agency

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" sustodie1 ;,

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.~ Administration ServKe UtiliCorp United (Missouri Southem Winois Power C Public service) Cooperative Westem Resources (Kansas Soyland Power cooperative b"'

7"8 Gas & Dectnc) Wabash Valley Power y[ U dj A s

Common Assoortion I;A ? gge [ % interconnection $

gass 45 -

<e' s -l A : c f 'M -* Y Electnc Energy. Inc.

1ssumen c% 4 IES Utilities

1. Winois Power Carbondale

[ Tennessee Valley Authonty Kentucky utiisties

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Financial Data

,i December 31, I996

! [*?""TUE] CIPSCO

, _ . . . , . , . ::q Earnings on Common Stock ,$292 milliosi9 $80 million l

l Earnings per Share [] . i.$2Ej $2.35

! 15iU de$id iU [ , J $2.54 ( $2.08 Assets  !'56.9 billiodl $1.9 billion  !

, _ ..__-..-.-x -

! l l Operating Revenues [$2.3 billion S $897 million v .

Return on Equity E 12.6% ? 12.2 %

Electric Revenues ~ $2.2 billiori l. $731 million Kilowatthour Sales f 41.3 billiorP 14.3 billion Generaeion Capacity Gas Revenues f $99 millionf $155 nillion (net, in megaram)

Dekatherm Sales  !!7.1 million 39.2 million

" " ~

Common Shares Outstanding l102,123,834 - 34,069,542 m l Market Capitalization . $3.9 billion ' $1.2 billion 93o . _

2,311 Employees . -6,035 Electric Customers ,i1,14 million 322,000 Gas Customers 123,000 169,000 88* -

Service Area square miles 24,500 20,000

• • ' ~~~

Bond Ratings gn .

DulT& Phelps AA- N/A Moody's Al Aal ,,3m __ _

Standard & Poon AA- AA+

sum -- -

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i 3#"'2 Merger Savings 33, _ _ _ _

(in millions) l 2,w - -.- -, . -

l Estimated Gross Savings - 5759 million u2s u2s [1 Nuclear (over a 10-year period) i3, _ p' __

e,c s H F,oss,l' i e% .} "") " []Ilydro

1. abor 35%

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$[- fP 7%

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UE CIPS Ameren j

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• Imlades 405 megawam and 203 megawamfor UE and Cll%

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..~ , Purchasing i196

7, Other 5% -i i,i$101 g# Gas 5%

Electric W Pmduction 13% ~(

Corporate &

Administrative 31%

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l Capitalization Al December 31,19% (in thousandi)

CIPSCO Ameren*

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Common Equity $2,354,901? (,',549ir$ 661,594 57 % $3,016,395 53 %

, y . . .. . #

i Preferred Stock N 219l121 *. - .. u5%1i 80,000 7% 299,t 21 5%

t i long Term Debt 1,798,671' 241%l 421,227 36 % 2,349,898 42% Ameren Capitalization Total Capitalization -54,372,593 100 % $1,162,821 100 % $5,665,414 100 %

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Preferred i ispnnapaaw,alin(,,rmarwn anwh. Lie, dwpnanusalmuda e,fDesmc Ewy bw. (HD, whuh wdlbe 60% owned by Amern EEOCk mbwquens to ulv moyer as a muls ofdw cunrnt ownenhap miemn in f El by Unium flectric a,ulCll">. l

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Common 1"

Equity

3 gO <

i Electric Rate Comparison #

1 For dueyear ended Daember 31,1996 (average rarnueper kilowarthour) long-l,crm Debt Percent below

. . .. . . y CIPS National Avg.*

, w.m.m.

pe wt Residential 47!!SC ' x 19%A 8.01c 9%

' \ ( .. ,s - [ 5, i Commercial h5' ,90 ? ' v25% t 6.76 14 %

5.

! Industrial I4.29 ? "13% - 4.67 5%

+-

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! Total Retail 5.92 17 % 6.55 8%

' At June 30.19% (then Hectrw imtm.te).

l 4

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! Ameren Electric Resenue Mix Wholesale /Other Res.denu.

i al m

.Mi y.lp%.

Electric Revenue Mix f"' 'h' year ended Daember 31,19% (in dromands)

~ '

l35% f

. E: WTIE"?M CIPSCO Ameren*

. .. n . , u

! Residential p?840,459 sS  ? ?399d $229,865 31 % $1,070.324 35 %

y. .. :n Commercial 6 E732,7971 "34%! 186,836 26 % 919,633 30 %

Commercial Industrial F 3'82,927

- 7 18$ 117,113 16 % 500,040 16 %

Wholesale /Other 204,632 9% 196,998 27 % 576,943 19 %

$2,160,815 100 % $730,812 100 % $3,066,940 100 %

'1%premsfnam o,dinformarwn conwhdann de}n.imi.d muli< wf Elatrw Entry Inc. tI th wlwh wdlle Wr owned by Anwere mbwqueur to tJv mexer as a mult ofsloc cuanrea wwwrd,rp msorm m (El by Unwn Ilamc ami Cll'\

7

l UNION ELECTRIC 1996 ANNUAL REPORT ,

i i

i l automated rneter reading is increasing our efficiency i

Automated meter reading, a wireless radio Systern, can automaticallytransmit data l PoslTIONED FOR GROWTR . .

Your company has long realized that tech-l

, I. .

i nology is an important ally in improving service reliability and responsiveness.

L Moreover, we continue to believe that low d

I rates and excellent customer service, combined with core technical strengths, will distinguish . ..c

)

I the winners.

We have a two-pronged strategy for cost- - -

l effectively employing technology for the .-

! customer's benefit. - .

UE is installing technology at customers' homes and businesses to link them directly to the company. By first quarter 1999, UE will have placed automated meters at 800,000 electric customer homes and businesses, using every five minutes, enabling the latest technology to read meters remotely. A pilot program is underway to include o are se natural gas customers. With this system, we can eliminate estimated meter readings and Above right:lerry Love, a UE better track customer energy use. meter and wiringinstaller for l

l By the end of 1996,135,000 of these electric meters were in place through a contract more than 30 years, shows a with Cel! Net Data Systems. Once this system is fully developed, the business customer can customer a new meter.

request a summary bill, showing energy costs at each of several locations.

In addition, once the system is in place, UE's will be one of the largest wireless data gathering systems in the United States.

5+ N. . UE continues to improve diagnostic and monitoring capabili-

'**"* ties so we can reduce power disruptions and quickly restore

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h d customers if they lose power.

Sophisticated computer systems help the company monitor g q service interruptions. We can automatically transfer data, like maps and diagrams, to computer terminals wherever they are

- even in service trucks. In 1996, we refined these systems so j

i that UE can remotely control the flow of power on lines, easily 1 growth 1 detecting problems.

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CONTR01.UNG COSTS I -

UE remained a low-cost producer in 1996, i 5;t allowing the company to maintain highly ww ..-

competitive rates. UE rates are 17 percent below

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F::.l the national average and 11 percent below the CE ,

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average rates of neighboring investor-owned

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.. utilities.

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In Missouri and Illinois, UE has not had rate I

l ( increases since 1987 and 1988, respectively.

j[h.

The company has reduced rates in Missouri three l #~ ,

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times in the past six years. In addition, UE has a

! g issued two credits totaling nearly $80 million to g Missouri dectric customers since the August 1995 creation of the experimental alternative l rate regulation plan. This plan calls for stockholders and customers to share earnings Strong Sales to Other above certain regulatory rate of return thresholds. Illinois retail rates, which are affected eieCtric utilities by changes in fuel prices through a fuel adjustment clause, have decreased 14 percent

, inte 1988.

n Union Electric's robust history

[ In 1996, the company continued to reduce staffing through attrition with year-end

ofinterchange sales to cther r employees numbering just above 6,000. That's 3 percent below year-ago figures and utilities got the company off 20 percent below the number of positions of a decade ago. We reduced executive to o lost stort under new management positions almost 10 percent in 1996.

/edero/ regulatory rules l establishedin 1996. UE As for non-labor costs, fuel is the company's largest single production expense item -

operates a 24-hout trading representing about 40 percent of total energy production costs.

system mth a reach extending UE continued to reduce coal costs through increased use of less-expensive, low-sulfur across more than 20 states. Westem coal - a more environmentally acceptable fuel choice.

Above: Engineers Lee Rippy Perhaps the most important measure of the company's overall ability to manage ond/loward Gugel, part of fuel costs is the amount we pay for fuel for each kilowatthour generated. In 1996 that UE's poner marketing team, cost declined to .985 cents - a 3 percent decrease from 1995, and a 25 percent drop

]

buying and selling electricity from1990.

l oround the clock.

l I

9 I

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The 1996 upgrade of Meromec Plant's Unit 4 AmseCM w % d m extendedthehfe of that Fuct Costs unit fordecades and madeitmore elficient. In 9

i theplant controlroom

,_cn ; { _ [ _ .,

, "~"} (centerphoto, fromleft):

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l Unit Operating Engineer 80 ^

,,j ,9; f fy l ' Ron Wucher, Operating .

SupervisorJertyMunster, '

andPlant Operating .

EngineerRayGimmings

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Bottam right: Randy I Taylor, lineman, a storin I o recent UE television i UE continues to hold comme'clol Collo"oY I down fuel costs #'o"'5^ ""'

completedthe 1996 refuelingin recordtime

, union ELECTRIC 1996 ANNuAt REPORT INVEsTINdF05TN Tl/TURs Your company continues to stress prudent, cost-effective management of all its facilities.

Continued investment in upgrading our coal-fired plants not only helps ensure plant availability but also helps delay the need to construct new power plants. We can continue to make these investments without adding to our debt.

In Jurie 1996, UE Power Operations completed a nine-month overhaul of Unit 4 at the 900-megawatt Meramec

$. Plant - a coal-fired generating plant i in South St. Louis County. The main-tenance effort induded replacement of 80 percent of the boiler tubing and installation of new bumers to reduce emissions and computer systems for better control over plant conditions and greater operational efficiency.

In 1996 and into 1997, we will continue to modify coal handling facilities at Sioux Plant to permit more efficient burning of even more lower-cost, low-sulfur Western coal.

In 1996, we received an award of excellence from the Governor of Missouri for our pollution prevention efforts in burning used tires as fuel at our Sioux Plant. By year-end 1996, we had burned nearly 2.5 million tires at that plant.

5*

Modifications at Meramec Plant in 1997 should allow the plant to burn low-sulfur coal from Western mines for the first time, reducing the plant's production costs.

--ma in 1997, Labadie Plant will burn nearly 100 percent low-sulfur coal- up from 85 percent in 1996. At Labadie,1997 will also g. ,

bring major upgrades in controls to allow for more precise moni-toring of boiler operations. This three-year initiative will reduce ,

fuel costs and increase generation.

1 11 l - _ - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

. . - - - _ - - .- _ - - - . -. - .. _ .-.-- - - -.-. - - ~_

UNION ELECTRIC 1996 ANNUAL REPORT a

UE BEEP! program cements relationships with business customers UE BEEPl on energy conservationprogram avail-able to business customers, has helpedhundreds of The 1,125-megawatt Callaway Plant shut down October 12,1996, for routine refueling and mainte-  :

nance, it returned to service November 11, setting a k- ~

Callaway refueling record of 31 days. s

^

Callaway's top performance and safety records a l come as a result of our focus on safety, cost contain-l ment and management development. In a period of M- N ...

increased regulatory scrutiny, Callaway continues to h 1 win regulatory and industry recognition for its safety ~ "f " " 7 . . . . . . . . . . h[A , h,

-*' * ].g 7 [

performance and operating efficency. .'<- 'j: E j1, J .

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STRONG CUSTOMERIIEs Our company must not only offer superior products and service to succeed, but we

" "#55"######

efficiently Above(fromleft):

must also build strong customer partnerships and respond effectsely to complex Mck Lombardi UE senior l

engineer, andJoe Forshaw, In 1996, UE continued to offer customers a range of innovative programs and flexible president of forshaw of energy solutions.

St. Louis, a 125-yearold, famityswnedspecialty store, BUslNESS CUSTOMERS andUEBEEP! customer.

In 1995, UE !aunched a Key Account Program, offering large industrial and commercial customers everything from a single l point of contact to the expertise of a team of professionals. The

/, m y, . ,

pmgram's objectives are to delser exceptional, customized i service, increase energv sales and realize greater retums for

>' 4 4h stockholders.

l A year into the program, the UE account executive team has aa ,

s. provided market intelligence on what customers need, what competitors are offering and how to increase the sales of non-l l ug j traditional products and services This program's initial success has prompted UE to expand the Key Account Program in 1997.

]

Services and products for commercial and industrial l

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conwns andindusus Kkmattixxx Sales (IAxs) I Business Sales

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• wiudes sees to customm m kwa se.we temtory sold m 19W customers are structured to increase UE revenues

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and build customer loyalty, while helping customers

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improve energy efficiency and comply with environ-

! mental regulations. A dozen programs for business i

j etomers range from evaluating performance of i

imge motors to guiding customers on purchases of energytfficient kitchen equipment for the small commercial customer, for example, there is UE's j Business Energy Efficiency Program (UE BEEP!).

l Since 1995, UE BEEP! has provided energy intelli-I gence to more than 900 businesses, cementing I

customer loyalty in this key market segment I

i REsIDENM CUSr0MERS I in 1996, UE began to offer its 800,000 Missouri-based residential customers I high-quality, fast and predictable appliance repairs through an appliance warranty plan.

I The UE On-Call Appliance Plan is one of many residential sector services l

new programs help build UE will be offering in coming years. Research shows that the more services a single f

j Customer 10yalty customer uses, the more loyal that customer will be when competition coms knocking.

In tm UElounchedits first in 1996 we also continued to increase the responsiveness and efficiency of the key link non-utdity service targetedt between UE and the residential customer - our Customer Service Call Center. Open 24 residentialcustomem the i

hours a day, UE's integrated call center operation handles 2.5 million calls annually -

1 UE On-Coll /ppliance Plan.

a double the number of five years ago.

Above: Steven Haber, owner of Oysta/ Appliance Senace, UE has installed technology to automatically prioritize calls. Systems intelligently one of the dealerpcrticipants route customers to the right representative and provide automated messages informing in the repair plan. customers when the company knows thcy are out of power. If the lights go out, I automation can even offer the customer an estimated restoration time.

i 1

i j 13 i

UNION ELECTRIC 1996 ANNUAL REPORT .

Ponu MARKETINd Working with utilities and power marketers in more than 20 states, UE remains a preferred partner in the purchase and sale of power on the interchange market and our strategic position and extensive interconnections allow UE to compete in the growing interchange and transmission service businesses. ,

in 1996, our expertise in purchasing power allowed UE to reduce production costs and keep rates competitrve. [f,Ngm f,

Lk,)( , vy NATURAE gas MARKETING '

n y '

When arctic weather blasted the Midwest in early February 1996, UE was able to keep g

the natural gas flowing - despite numerous problems across the nation with supply.

The gas industry was forced to deal both with serious production problems and record peak demand. The result was skyrocketing prices and severe natural gas shortages. Through effective use of stored capacity and round-the-clock persistence, UE's engineers delivered gas - without hm - - -

interruption - to all of the company's firm customers. W SUMMARf UE will continue to focus on the approaches that have served us well in the past.

We will; o Continue to expandour core business;

? O Controlcosts andprices to remain competitive; o Continue to use technology and employee training toimprove service; O Offer newproducts andservices thatprovide a retum to v  %  %

shareholders and cement customer loyalty; and o Rewardstockholdersfairly In a changing environment, such strategies may not be dramatic.

But they work.

14

HERM I Union Dectsic's Key Account Decutives identitsernces ta soAe Competitive Rates customernceds'and gy suggestinittotsws to help .

62 anomersnduce enerav 7 - ~ .__ V costs comply with stricter environmento!regulo-

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tim inn e//iciency l 92 93 '94 ' $5 %

andproductivityand l

- expandprodualines . l i

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'n. . .. ly Shown in the picture l obote right;1ahn Nevin a $trong economy and l0W l (le/o. plant monager, rates have pushed revenues i i nheuser-Buschbreawr, A

t0 a record $2.3 billion I and UE KeyAccount Decutive Milt tone.

t 1

/ UNION ELECTRIC 1996 ANNUAL REPORT q -

l Responsibility for Financial Statements The management of Union Electric Written policies and procedures have been Company is responsible for the information and developed and are revised as necessary. The representations contained in the financial state- Company maintains and supports an extensive ments and in other sections of this Annual program ofinternal audits with appropriate Report. The financial statements have been management follow up.

prepared in conformity with generally accepted The Board of Directors, through its Auditing accounting principles. Other information Committee comprised of outside directors, is included in this report is consistent, where responsible for ensuring that both management applicable, with the financial statements. and the independent accountants fulfill their The Company maintains a system ofinternal respective responsibilities relative to the financial accounting controls designed to provide reason- statements. Moreover, the independent accoun-able assurance as to the integrity of the financial tants have full and free access to meet with the records and the protection of assets. Qualified Auditing Committee, with or without manage-personnel are selected and an organization struc- ment present, to discuss au3 ting or financial ture is maintained that provides for appropriate reporting matters.

functional responsibility.

Report of Independent Accountants

& Price Haterhouse LLP February 4,1997 800 Market street Telephone 314-206-8500 To the Stockholders and Board of L us. 63 M Directors of Union Electric Company in our opinion, the accompanying balance audits. We conducted our audits of these state-sheet and the related statements ofincome,long- ments in accordance with generally accepted term debt, preferred stock, retained earnings, auditing standards which require that we plan 1 and cash flows appearing on pages 22-36 of this and perform the audit to obtain reasonable report present fairly, in all material respects, the assurance about whether the financial statements financial position of Union Electric Company at are free of material misstatement. An audit December 31,1996 and 1995, and the results of includes examining, on a test basis, evidence its operations and its cash flows for each of the supporting the amounts and disclosures in the three years in the period ended December 31, financial statements, assessing the accounting 1996, in conformity with generally accepted principles used and significant estimates made by accounting principles. These financial statements management, and evaluating the overall financial are the responsibility of the Company's manage- statement presentation. We believe that our ment; our responsibility is to express an opinion audits provide a reasonable basis for the opinion on these financial statements based on our expressed above.

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Management's Discussion And Analysis Union Electric is an investor-owned regulated public utility The increase in 1996 electric revenues was due to a 3.5%

that supplies electric and gas services to 1.3 million increase in kilowatthour sales over the year-ago period, partly customers in a 24,500 square-mile area in Missouri offset by the 1.8% rate decrease for Missouri electric (including metropolitan St. Louis) and Illinois. customers and the net increase in customer credits recorded during 1996 versus 1995. See Note 3 - Regulatory Matters Merger under Notes to Fmancial Statements for further information.

Union Electric and CIPSCO Incorporated (CIPSCO) entered The kilowarthour sales increase reflected strong economic into a Merger Agreement (Agreement) dated August 11, growth in Union Electric's service area and increased inter-1995. The Agreement was approved by the shareholders of change sales opportunities, partially offset by milder weather both companies in December 1995.The merged entity is during the period. Residential and commercial sales each rose expected to realize $644 million in net savings over 10 years 3% over 1995, while industrial sales grew 2% and inter-from combining certain operations of the two companies and change sales increased 7%.

is expected to adopt Union Electric's dividend payment level. The increase in 1995 electric revenues was due to However, the merger is conditioned upon, among other increased retail kilowarthour sales compared to 1994, things, receipt of certain regulatory and governmental mainly due to unusual.'; hot weather in the third quarter approvals. At this time, the merger is expected to be consum- and sales growth reflecting our healthy service area economy.

mated by the end of 1997. See Note 2 - Merger Agreement Weather-sensitive residential and commercial sales increased under Notes to Financial Statements for further information. 6% and 3%, respectively, over 1994, and industrial sales grew 3%. This increase was partially offset by the one-time Results of Operations $30 million credit, the rate decrease and a 17% decline in Common stock earnings for 1996,1995 and 1994 were interchange sales due to decreased interchange sales oppor-

$292 million ($2.86 per share), $301 million ($2.95 per tunities. See Note 3 - Regulatory Matters under Notes to share) and $308 million ($3.01 per share), respectively. Financial Statements for further information.

Earnings and earnings per share fluctuaed due to many The increase in 1994 electric revenues reflected growth conditions, primarily: weather variations, electric rate reduc. in sales to commercial and industrial customers of 4% and tions, credits to electric customers, sales growth, fluctuating 2%, respectively, and increased interchange sales of 9%,

operating costs, including Callaway nuclear refueling outages, Partially offset by reduced sales to residential customers of merger-related expenses, changes in interest expense and 2%, primarily due to milder weather in the first and third changes in income and property taxes, quarters of 1994, compared to 1993.

The impacts of the more significant items affecting revenues, costs and earnings during the past several years are Operating Expenses analyzed and discussed below: Fuel and Purchased Power veinti,. fm /w, n, mL. ,fa/!,n) p 19N j 1995 1994 Operating Revenues Fuch j EJectnc Variation in generation 8 15.1 $1.2 $ 52.6 van,uanfm./w ,n ,

1,9) (.8) (76.9) mL. ,fallan>

M99j6 1995 1994 Generation efficiencies d Rate variations Credit to customers

{$(19.6)! $(13.7) $- and other Purchased power h) J2.53 t

j 1.8 (2.0)

[(N.7)l y (32.6) - I i vananon 8.3i 5.2 (43.5) weat er h  ?(63.2) 52.8 (33.9) $ 8.0 - $7.4 $(69.8) i.

Growth and other " ; 95.0 f; 38.4 37.5 Interchange sales The increase in 1996 fael and purchased power costs was 9.2 ' (28.1) 13.7

) .

dn.ven mamly by higher kilowatthour sales, partially offset

$ 6.7e; $ 16.8 $ 17.3 by lower fuel prices due to the use oflower-cost coal. The 17

9 C

(

l Management's Discus, ion And Analysis l increase in 1995 fuel and purchased power costs reflected trimming expenses, partly ofTset by lower Callaway Plant increased purchased pour costs due to greater kilowarthour maintenance expenses (no refueling outage in 1994) and l

sales during the hot 1995 summer and the need for replace- reduced labor expenses.

ment powet during Callaway's spring refueling outage. The Depreciation expense increased $8 million in 1996, $7 decrease in 1994 fuel and purchased power costs reflected million in 1995, and $6 million in 1994, due to increased lower fuel prices, resulting from the incrmsed use oflow- depreciable property.

sulfur coal at our fossil plants and greater generation at our nuclear plant due to the absence of a refueling outage in Taxes 1994. Higher generation, resulting in greater fuel costs, was income tax expcase from operations decreased $12 million offset in part by reduced purchased power costs. in 1996 principally due to lower pre-tax income and a Other operating expense variations in 1994 through lower effective income tax rate. Income tax expense from 165 reflected recurring factors such as growth, inflation, operations increased $3 million in 1995 primarily due to a aru wage and benefit increases. In 1996, operations higher effective income tax rate partially offset by lower pre-expenses, other than fuel and purchased power costs, tax income.The $27 million increase in 1994 income tax inreased $25 mClion primarily due to a 26% rise :n expense resulted from higher pre-tax income and a higher l natural gas parchasul for resale (due to higher sales and gas efTective Missouriincome tax rate, prices), and increased employee benefits, injuries and in 1996, other taxes charged to operating expenses i damages, and consulting expenses. In 1995, operations inen . e $1 million due to increased rea! ; state and payroll expenses, other than fuel and purchased power costs, tax, b 1995, other taxes charged to operating expenses decreased $17 million, mainly due to a 15% reduction in increased $2 million due to increased gross receipts taxes natural gas purchased for resale (due primarily to lower gas from greater electric revenues and increased real estate taxes.

prices) nd decreases in empleyce benefits, injunes and in 1994, o:her taxes charged to ore,a ng expenses rose damages, and insurance expenses. These decreases were $4 million due to increased real estate taxes and greater partially ofTset by increased labor and matenal and supplies corporate franchise taxes.

expenses. In 1994, operations expenses, other than fuel and purchased power costs, decreased $10 million, primarily Other Income and Deduction =

l due to a 10% reduction in natural gas purchased for resale Miscellaneous, net increased $1 million for 1996, nrirnarily l (due to lower sales and gas prices), and decreases in labor due to reduced merger-related expenses. Miscellaneous, net and employee benefits expenses. These decreases were decreased $6 million for 1995, primarily due to merger-partially offset by increased injuries and damages, related expenses. Merger-related expenses totaled $8 million consulting and communications expenses. and $9 million in 1996 and 1995, respectively. See Note 2 In 1996, maintenance expenses increased $2 million - Merger Agreement, under Notes to Financial Staicments

! primarily due to increased labor evpenses at Callaway and for further information. Miscellaneous, net decreased $4 the te sil plants. In 1995, maintenance expenses increased million for 1994, primarily due to increased charitable l

l D rillion, mainly due to increased power plant mainte- contributions.

nance expenses partially offset by reduced distribution system maintenance expenses. Callaway Plant's rrmintenance interest expenses increased $17 million primarily due to the apring interest expense for 1996 decreased $2 million primarily 1995 nuclear refueling outage. Maintenance expenses at due to lower debt outsts 'ing during the year and lower other power plants incceased $11 m'llion primarily due to rates on variable-rate Im _ em debt. In 1995, interest scheduled maintenance outages. In 1994, maintenance expense declined $6 million as decreases in other interest expenses increased $8 million, mainly caused by additional expense were partly offset by higher interest rates on vari-maintenance expenses at the fossii plants and greater tree- able-rate long-term debt. In 1994, interest expense 18

9

. . ~ . .

increased $12 million generally due to a greater amount of in December 1996, the Environmental Protection total debt outstanding and overall higher interut rates on Agency proposed new air quality standards for ozone and variable-rate debt. particulate matter. The proposed standards, if ultimately adopted, would result in increased clean air related capital Balance Sheet c sts and operating expenses. However, the Company is The $55 million increase in other current and accrued liabili- unable to predict whether any new air quality standards ties at December 31,1996, comparW to December 31, will be adopted, or what impact ar. tew standards would 1995, was primarily due to the timing of the payments of have on the Company's future financial condition, results the $47 million customer credit. See Note 3 - Regulatory of operations or liquidity.

Matters, i nder Notes to Financial Statements for further See Note 13 - Callaway Nuclear Plant under Notes to information. Financial Statements for a discussion of Callaway Plant decommissioning costs.

Cash flows used in financing activities were $238 Liquidity and Capital Resources million for 1996, compared to $299 million and $211 Cash provided by opeiating activities totaled $605 m. h.d on million for 1995 and 1994, respectively. The Companis for 1996, compared to $640 million and $544 m. h.d on for principal financing activities during 1996 included the 1995 and 1994, respectively.

. . ... redemption of $35 million of First Mortgage Bonds and $8 Cash flows used m. mvestmg activmes totaled $363 million of short-term debt bank loans, and the payment of mdlion, $341 m. dlion and $333 m. h.d on for the years ended divi 4nds. In addition, on December 16,1996, Union December 31,1996,1995 and 1994, respectively.

Fb6 issued $65.5 million of Subordinated Deferrable Expenditures in 1996 for constructing new or improving

. . Interest Debentures,7.69% Series, due 2036. The existing facih. .ues, purchasm.g rad cars and comply.mg with the

., Company used the proceeds to redeem certain series of Clean Air Act were $325 m.dlion. In add. .ition, the t.ompany preferred stock in January 1997.

spent $51 m.dlion to aajuire nuclear fuel.

The Company completed Callaway Plant construction First Mortgage Bond Ratings in late 1984. The need for additional base load electric Dufr& Phelps AA-generating capacity is not anticipated until after the year Moody's Al 2013. Under the Clean Air Act Amendments of 1990, the Standard & Poor's AA-l Company is required to reduce total annual sulfur dioxide i

emissions significandy by the year 2000. Significant The Company plans to continue utilizing short-term reductions in nitrogen oxide are also required. By switching debt to support normal operations and other temporary to low-sulfur coal and early banking of emission credits, the requirements. The Company is authorivd by the Federal l Company anticipates that it can comply with the require- Energy Regulatory Commission (FERC) to have up to

) ments of the law without significant revenue increases $600 million of short-term unsecured debt instrumems

(

b ise the related capital costs, estimated at about $300 outstanding at any one time. Short-term borrowings milhon, are largely offset by lower fuel ccsu. As of year-end consist of bank loans (maturities generally on an overnight 1996, about 84% of the Clean Air Act-related capital costs basis) and commercial paper (maturities generally within have been expended. 10 to 45 days). At December 31,1996, the Company had committed bank lines of credit aggregating $17s .nillion l

Capital Requirements (of which $168 million were unused at such date) which

] Actual: Forecast tnake available interim financing at various rates efinterest l (NdL= ,flW/.m) 1996 w1997 1998 1W9 2000 % based on i IBOR, the bank cerdficate of deposit rate, or l Construction Expenditure:; $325 525n 5258 52M 5275 O' other options. The lines of cred'. .c renewable annually at 19

1 e

l l

1 Management's Discussion And Analysis various dates throughout the year.The Company also has cition. At the federal level, the Energy Policy Act of 1992 bank credit agreements due 1999 whic h permit the reduced various restrictions on the operation and ownership borrowing of up to $300 million and $200 rnillion on a ofindependent power producers and gave the FERC the long-term basis. At December 31,1996, no such borrow. authority to order electric utilities to provide transmission ings were outstanding. access to third panies.

Additionally, the Company has a lease agreement which On April 24,1996, the FERC issued Order 888 and provides for the financing of nudear fuel. At December 31, Order 889 which are intended to promote competition in 1996, the maximum amount which could be financed under the wholesale tric market. The FERC requires transmis-I the agreement was $120 million. Cash provided from sion-owning , ac utilities, such as the Company, to financing for 1996 included issuances under the lease for Provide transmission access and service to others in a nudcar fuei of $44 million offset in pan by $35 million of manner similar and comparable to that which the utility has redemptions. At December 31,1996 $106 million was by vinue of ownership. Order 888 requires that a single financed under the lease. See Note 6 - Nudear Fuel Irase tarifT be used by the utility in providing transmission service.

under Notes to Financial Statements for funher information. Order 888 also provides for the recovery of stranded costs. l Order 889 established the standards of conduct and l Contingencies information requirements that transmission owners must See Note 12 - Contingencies under Notes to Financial adhere to in doing business under the open access rule.

Statements for material issues existing at December 31,1996. Under Order 889, utilities must obtain transmission service

.3 for their own use in the same manner their customers will I Dividends obtain service, thus mitigating market power through On October 11,1996, the Board of Directors increased the control of transmission facilities. In addition, under Order i quanerly common stock dividend to 63.5 cents per share 889, utilities must separate their merchant function (buying l

from 62.5 cents, raising the indicated annualized common and selling wholesale power) from their transmission and stock dividend 'to $2.54 per share. Common stock dividends reliability functions.

paid in 1996 resulted in a pay out rate of 88% of the The Company believes that Order 888 and Order 889, Company's earnings to common stockholders. Dividends paid which relate to its wholesale business, will not have a mate- 'i to common stockholders in relation to net cash provided by rial adverse effect on its financial condition, results of opera-l operating activities for the same period were 42%

tions or h.quidity. 4 l The Board of Dirrat rs does not set specific targets er -

. In addition, cenain states are considen.ng proposals that payout parameters for uaidend payments. In .its annual would restructure the m. dustry at the retail level. In  ;

review ofdividend payments, however, the Board conn.ders . . .

M.issoun, where 92% of the Company,s retad electnc various issues induding the Company,s historic carnings and revenues arc den.ved, there has been no significant legislau. ve cash flow; projected earnings, cash flow and potential cash . .

acu n regardm.g mdustry restructuring to date, nor has retail flow requirements; dividend increases at other utilities; return on investments with similar risk characteristics; and wheeling been alh>wed in the state. However, the joint stipu-lati n agreement submitted to the Missouri Public Service j overall business considerations.

Commission in July 1996 as part of the Company's Rate Matters - proposed merger with CIPSCO indudes a provision that would require the Company to file a proposal for a 100- )

l See Note 3 Rgulatory Matters under Notes to Financial Statements for runher information. megawatt experimental retail wheeling pilot program in j Missouri. (See Note 3 - Regulatory Matters under Notes to

, Industry Restructuring Financial Statements.)

Changes enacted and being considered at the federal and in Illinois, the state General Assembly formed the joint l state level continue to change the structure of the industry Committee on Flectric Utility Reform (Joint Committee) in and utility regulation, as well as encourage increased compe- May 1995 to study utility deregulation and issue a recom.

20

. m % A. .

R._

mendation. The Joint Committee did not issue a final measurement, display and disclosure of environmental recommendation during 1996. However, in November 1996, remediation liabilities. SOP 96-1 is effective January 1, the Illinois Coalition for Responsible Electricity Choice 1997, and is not expected to have a material effect on the (Coalition ) proposed legislation to restructure the Illinois Company's f'nancial position or results ofoperations electric industry. The Coalition is comprised of most of the upon adoption.

state's investor-owned utilities, including the Company, and various business and consumer groups. The proposed legisla-Effects ofInflation and Changing Prices tion provides for an electric rate freeze through 1999; an The current replacement cost of the Company's utility plant annual 1.5% residential electric rate reduction from 2000 to . . .

substantially exceeds .as recorded histoncal cost. Under 2004; retail choice for customers (large utility users would .

. . . existing regulatory practice, only the h.istoncal cost of plant have this opuon m 2000, wa. h all other customers bem.g .

is recoverable from customers. As a result, cash flows phased m. through 2005); recovery of transition costs; and designed to provide recovery of historical plant costs retail wheeling pilot programs. Other forms oflegislation have been proposed as well. through depreciation may not be adequate to replace plant The Company is unable to predict the timing or ultimate in future years. However, past pra.tice indicates Union outcome of the various industry restructuring initiatives being Electric will be allowed to earn on and to recover the considered. The potential negative financial consequences of increased cost of replacing facilities when this occurs. The industry restructuring include the impairment and writedown impact n comm n st ckholders is mitigated to the extent of certain assets, including regulatory assets, lower revenues, depreciable property is financed with debt that is repaid reduced profit margins and increased costs ofcapital. At this with dollars ofless purchasing power.

time, the Company is unable to predict the impact of poten-tial industry restructuring matters on the Companys future Safe liarbor Statement financial condition, results of operations or liquidity. Statements made in this annual report to stockholders which are not based on historical facts are forward-looking Our Strategy and, accordingly, involve risks and uncertainties that could The Company's management and Board of Directors recog- cause actual results to differ materially from those discussed.

nize thHncreasing probability of more competition in the Ahhough such forward-looking statements have been made future, and ahhough the Company cannot accurately predict in good faith and are based on reasonable assumptions, the timing or nature of this competition, the Company oper- there is no assurance that the expected results will be ates its business assuming this competition will occur. Union achieved. These statements include (without limitation)

Electric's basic business strategy is 1) to improve the statements as to future expectations, beliefs, plans, strate-Company's competitive position by continually enhancing gies, objectives, events, conditions and financial perfor-customer service; 2) to maintain competitive electric rates; mance. In connection with the "Sie Harbor" prouions of

3) to reduce costs to the lowest levels possible without compro_ the Private Securities Litigation Reform Act of 1995, the mising customer service, employee safety, environmental Company is providing the following cautionary statement stewardship, fair returns to stockholders or fair rewards to to identify important factors that could cause actual results employees; and 4) to continue to expand our core business. to differ materially from those anticipated. Factors include, but are not limited to, the effects of: regulatory actions:

Accounting Matters changes in laws and other governmental actions; competi-In October 1996 the American Institute of Certified tion; business and economic conditions; weather condi-

)

Public Accountants issued Statement of Position 96-1, tions; fuel prices and availability; generation plant I

" Environmental Remediation Libilities" (SOP 96-1). This performan monetary and fiscal policies; and legal and )

statement establishes standards for the recognition, administranse proceedings.

21 l 6

e C

i i

Statement Of Income I

[lkuund, afDuHan Earps %m andIW %,e Amc.una)

Year Ended December 31, FA spg6j 1995 1994 i Operating Revenues: NhN f Electric $2,154,109 $2,137,355 l Gas Steam d[d@S Q

OE Widdl 87,814 441 86,109 474 ,

E Total operating revenues ] 2,242,364 2,223,938 OferatingExpenses-

$w. ;'!

OM/M ,

Operations: j ,f ,

Fuel and purchased power M$t2A$4 504,815 497,384 Other h 44986 419,121 435,666  ;

@ 5 %445j 923,936' 933,050 i Maintenance p " $$$A54 221,609 197.760 Depreciation and nuclear decommissioning icf3(1,398)1233,237 226,045  ;

income taxes -209,541 206,421

_ Ocher taxes h'tgI97,989)h ff %2413di6 212,145 210,476 Total operatingexpenses OaIAR2A991 1,800,468 1,773,752 Q . , ,,a &

OperatingInccme f.& U438,5441 441,896 450,186, Other Income and Deductions: 5N U Allowance for equity funds used during construction b ;6,492j 6,827 5.767-Miscellaneous, net M f(4,29F (5,981) 403 Total other income and daluctions, nc & v2,1991 846 6.170 0 R id  !

Income Before Interest Charges - P 2430,5131 442,742 456,356  :

Interest Charges:

kn

1. . >'N Qj Interest g ' [132,644 j 134,741 141,112 i Allowance for borrowed funds used during construction b  :(7,007)I (6,106) (5,513)

Net interest charges F ' 125.637J 128,635 135,599

.-2 W Net Inwme M ;304,876$ 314,107 320,757 y' 'A Preferred Stock Dividends t = 13.249 0 13,250 13,252 b

N $

.. '9 291,6275 $ 300,857 $ 307,505

EARNINGS ON COMMON STOCK '

l i,v n; j EARNINGS ITR SilARE OF COMMON S10CK p _\

(bmed on average shares oumanding) - ' $2.86 $2.95 $3.01 N ..

DIVIDENDS IT:R SilARE OF COMMON STDCK $2.516 $2.455 $2.395 .

AVIRAGE COMMON SitAnts OtrnTANDING I102,123,8340102,123,834 102,123,834 ,

i See Notn to RnancurlStatemrun on j,agn 29 skugh 36. .

1 l

l 22 i

o l Statement Of Cash Flows (Thouumds ofhdisn)

Year Ended December 31, b (19964 1995 1994 y

Cash Flows From Operaung: ~ ,aN Net income j $ 304,876 i 5 314,107 5 320,757 AJjustments to reconcile ner income to net cash provided by operating activities: y$[?d f .M Depreciation and amortization h*[231,743) 223,705 216,731 Amortization ofnuclear fuel  : 35,140 44,267

. Allowance for funds used dunng construction [L37,7921 (13,499)f (12,933) (11,280)

Ibstretirement benefit accrual -; I1,923 24,680 Deferred income taxes, net h ,4,948]d. (5,628) (18,430)

Deferred investment tax credits, net Changes in assets and liabill:ies: (h];(6,182)i

,j_.d (6,181) (6,182)

Receivables, net pl(11,028)! (41,405) 23,020 Materials and supplies 11,914 (10,643)

Accounts and wages payable f((18,866)l p 4/,32 y 108,997 (94,180)

Taxes accrued f ?3,832l (5,722) 10,710 Interest accrued and dividends declared I,j f (1,379)) (9,654) 14,657 Other, net h J67,723's 15,249 29,966 Net cash provided by operating activities 11 604,692 d 639,512 544,073 r: 'q Cash Flows From Investing: k i Construction expenditures if(325,110)i (311,253) (314,050)

Allowance for funds used during construction 12,933 11,280 Nuclear fuel expenditures [hj(51,176)1 13,499j (42,444) (30,458)

Net cash used in investing activities i:-(362,787)) (340,764) (333,228) g Cash Flows From Financheg:

Dividends on preferred and common stock (269,272); (263,964) (257,838)

Environmental bond funds  ; G --- J 4,443 12,583 Redemptions - j . .

Nuclear fuellease ..(34,819)j (70,420) (32,137)

Short-term deb: F - (8,300)l - (59,600) leng-term debt 4 (35,000)l (38,000) (25,000)

Preferred stock , (26); (26) (26)

Issuaces - ['

Nuclear fuellease 43,884 49,134 51,386 Short-term debt .

e 19,600 -

lonj;-term del : 65,500 ' - 100,000 Net cash used in tmancing activities -(238,033). (299,233) (210,632)

Net change in cash and cash equivalents ,

3,872 (485) 213 Cash and cash equivalents at beginning of year 1,025 - 1,510 1,297 CASH AND CASH EQUIVAUNIS AT IND OF iTAR

• 5 : 4,897 ' 5 1,025 5 1,510 Cah and cah equivalenu indude cah on hand and tempnrary investmenn purthet with a muunev of three months or less Cash paid during the periods:

Inrercsr (net of amount capitalized)  ; 5 120,745 5131,635 5 108,319 income taxes 5 193,043 5 226,458 5 217,417 See Norn to RnanaalStatemnin on pagn 29 shmugh 36 23

i i

i Balance Sheet I J

Assets (1kunnds offkdian)

December 31, p QM1 1995 Property and Plant, at original cost: gg+tdW[]9 e Mf 1 Electric

$Mi 58,319,632 j Gas %j l$IyMs j 174,231 i Other r 35,033 L-M, 8,528,896 Less accumulated depreciation and amortization IM}Ni 3,465,699 5,063,197 j

l Construction work in progress: f iy j Nuclear fuelin process Other f[f [9fJiWl W R $$5, 85,916 125,934 Total property and plant, net ,. 6 5,275,0 0 Regulatory Assets:

{b[b[,

nki / '$

Deferred income taxes 732,580 1 Other Q8Llytj$

e M78,'JW 193,593 Total regulatory assets . 926,173 f $7t991[ ]

NW s

,?4 ,

l Deferred CharEcs and Other Assets:

, Y; . O; - l Nuclear decommissioning trust fund [96JE01j 73,838 11,293

{

Unamortized debt expense g10.5914  ;

Other > 2A27,3El 20,101 1 Total deferred charges and other assets y(134,569j 105,232 j h,,y i

c.,,en, m s g s ;f, -

Cash p: l 4,897j - 1,025 I Accounts receivable - trade (less allowance for doubtful b s .

s3 1 accounts of $5,195 and $6,925, at respective dates) 192,868l 191,520 Unbilled revenue yfI( l$76,190f 82,098 Other accounts and notes receivable { . " 37,190j 21,602 Materials and supplies, at average cost - F: ,

,j Fossil fuel b , ;'63,6512 46,381 Construction and maintenance II ? 94,517 $ 92,921 Other b i .326l 13 12,470 Total current assets k. 482,6391 448,017 r ,

f )

b L

Tmn Assrrs 56,870,809 L- 56,754,469 See ken so hnascialSsasemena en pagn 29 shnwgh 36 24

i

,. t a n ,, c. ..-

l Balance Sheet Capital and Liabilities r% ands nkaan)

December 31, ',4 e19961 1995 Capitalization: ,

'd Common stock, $5 par value, authorized 150,000,000

% ,' "2 :s

^

shares - outstanding 102,123,834 shares (excluding M .J 42,990 shares at par value in treasury)

(($e,.45,g804t9 $ 510,619 Other paid-in capital, principally premium on # L...a .

common stock f737AfD, 717,669 Retained earnings (see accompanying statement) hdan,583 1,090,909 Total common stockholders

• equity 2,$54,80l? 2,319,197 fd Preference stock, $1 par value, authorized 7,500,000 shares - none outstanding

[Ng@M 4 Q! M

.-i Preferred stock not subject to mandatory redemption p/d MNj -

(see accompanying statement) [ J218,49p 218,197 Preferred stock subject to mandatory redemption 9 Vj (see accompanying statement) G C624) 650

. . , qs long-term debt i1,808.255] 1,773,192 Unamortized discount and premium on debt (9,582)! (9,579)

Total long-term debt (see accompanying statement) b1,7984714 1,763,613 Total capitalization 4,301,957 5.d4,572,593 j Arcumulated Deferred Income Tax.es @1$lkM 1,357,689 y .,A Accumulated Deferred Investment Tax Credits P J160,342$ 166,524

_ _; i Regulatory Liability 1 203,322 0 216,502 y - .y Accumulates. Provision for Nuclear Decommissioning W TU; .98,2741 75,511 0 , _ - .<

Other Deferred Credits and liabilities  ? L156,913 3 150,600 e +

Construction, Commitments and Contingencies  ? g (Notes 11,12 and 13) k Current Liabilities: ,

-Current maturity oflong-term debt p 73,966) 69,462 Accounts payable p '170,383l 169,012 i Wages payable s :39,966 ; 36,605 Bank loans f 11,300j 19,600 Accumulated deferred income taxes , 43,933 J 27,429 Income taxes accrued p< 35,$05 f 29,986 Other taxes accrued 16,040 { 17,727 Interest accrued < 45,1734 46,244 Dividends declared 3,004 -l 3,312 Other ' ~121,1915 66,309 Total current liabilities 560,461 485,686 T0rTAI. CAPITA 1, AND LIABIIMES $6,870,809 - $6,754,469 Su Noen to FiwwialStasemenn on pagn 29 thres,gh %

25

5 Long-Term Debt (Thouund ofIMLun)

December 31 MPW4 1995 First MortgaBe Bonds - note (a) 5V%2 Series due 1997 5 40,000 t l h 5%% Series due 1997 & 5,000 6%% Series due 1999

• _. y{ 100,000 8.33% Series due 2002 7.65% Series due 2003 f!N i

75,000 100,000 67/s% Series due 2004 kf 188,000 7%% Series due 2004 @ 85,000 6%% Series due 2008 W 148,000 D

7.40% Series due 2020 - note (b) 1 60,000 8%% Series due 2021 F y% 125,000 8% Series due 2022 Q, ,

85,000 8%% Series due 2022 # 104,000 7.15% Series due 2023 7% Series due 2024 ID 75,000 100,000 W 900iO90h 5.45% Series due 2028 - note (b) g y n000 44,000 Missouri Environmental Improvement E'$ q Revenue bonds 1984 Series A duc 2014 - note (c) , 00A100j " 80,000 1984 Series B due 2014 - note (c) y 08A100; 80,000 1985 Series A due 2015 - note (d) g]7BA100j 70,000 1985 Series B due 2015 - note (d) P!NMs500 a 56,500 1991 Series due 2020- note (d) $hy42.505) 42,585 1992 Series due 2022 - note (d) g 747,500] 47,500 Subordinated Deferrable Interest Debentus 7.69% Series A due 2036 - note (e) b f 4 5,500 i

] ,

Unseemd Loans - notes (f)(g)

Nuclear Fuel Lease - note (h)

[i L-d N E 77,168 4 62,607 IDNG-TERM DE.8T b,808,253 5 1,773,192 UNAMOlGIZED DISCOUNT AND PREMIUM ON DEBT - (9.582) ? (9,579)

TotAt IDNG-TERM DEaT E $1.798,6719 $1,763,613 (a) As December 31,19%, sulatantially all of the pmperty and plans was mortgaged under, and subject to Iwns of, the respective indentures

- pursuant to which the bonds were issued.

(b) EnvironmentalImprovement Series.

(c) On lune i ofcach year, the interest rate is established for the folk =ing year, or alternatively at the option of the Company, may be Gsed until maturity. A per annum rate of 345% is effectiw for dr year ending May 31,1997.Thereafter the interest raren will depend on market condishm. and the selection of an annual wrsus remaining life rare by tir Company The average interest rare for the year ended December 31,1996, was 3.80%

41) Interest raies, and die penuds during which such rares apply. vary depending on the Company's acleceion of certain defmed rare modes.

The average interest s<tes for the year 19%. for 1985 Series A 1985 Series it.1991 Series and 1992 series imnds were 3A5% 3.52%

348% and 347% respectively.

(e) During the term of th: debentures, the Company may, under certain circumstances, defu the paynwns ofinterest for up to five years.

(O A bank cmlir agreement duc 1999 permits dw Company to born = up to $200 milhon. Interes: rares will vary deperiding cm marker conditions and the Company's selectim ofvarious opuuns under the agreement. At Decemtwr 31.19% no such bornming were outstanding.

(g) A bank credit apeement duc 1999 permits the Company to born = or to suppon commercial paper burmwings up to $300 milhon.

Interest rares will vary depending on madet conditiom. At December 31,1996, no such hormwing were oursuanding.

(h) As Dnember 31,19% and 1995,529 milhon and $34 milhon, respectively, were included under current maturity oflongaerm debt.

See Norn so &mcialSwemenn on pagn 29 shmugh %

26

Preferred Stock (Thouurnd, ofIkdlan)

Decemt,er 31, m -1996a 1995 Yg';v . ,

Preferred Stock Not Subject to Mandatory Redemptiom E N Preferred stock outstanding without par value '

,n '

(entitled to cumulative dividends) - note (a) ~G i

,, *h Redemption Price ..

(per share)

Stated value of $100 per share-

$7.64 Series - 330,000 shares k ]Q $ 33,000

$103.82 -note (b) [;$ 33,000fj

$7.44 Series - 330,001 shares 101.00 - note (c) 05133,000 J. 33,000 56.40 Series - 300,000 shares ya .

30,000 101.50 - note (c) 30 ,000 9

$5.50 Series A- 14,000 shares 110.00 q:i1,4003 h 1,400

$5.50 Series B - 3,000 shares sa >4 103.50 - note (c) [ ij3003 300

$4.75 Series - 20,000 shares

$4.56 Series - 200,000 shares 102.176 102.47 hl 'J2.000$

R !20,000 3 20,000 2,000 c v. . . 1

$4.50 Series - 213,595 shares 110.00 - note (d) p i 21,359 3 21,359

$4,30 Series - 40,000 shares 105.00 h ' 4,0001 4,000

$4.00 Series - 150,000 shares 105.625 I 15,000

$3.70 Series - 40,000 shares 104.75 f l15,000Q

. 4,000 j 4,000

$3.50 Series - 130,000 shares 110.00 g 213,0001 13,000 Stated value of $25.00 per share - I>o-'13 -

$1.735 Series- 1,657,500 shares 25.00 - note (c) , 41,438 ? 41,438 h.-

j e .3 TOTAL PRrfLRRID SIUCK Nor Sunjrci m To MANDAlDRY REDrmrlON E $218A97h $218,497 Preferred Stock Subject to Mandatory Redemptioru Preferred stock outstanding without par value ,.

(entitled to cumulative dividends) - note (a) ,

Stated value of $100 per share -

$6.30 Series - 6,240 and 6,500 shares at respective dates, due 2020 $100.00 - note (c) $624- $650 TcrrAL PRITERRED S10CK SUBjrCT To MANDATORY REDEMPTION $624 $650 (a) Audorized Union rJectric Company rotal preferred simk - 25,000.000 shares.

(b) Beginning February 15,2003, eventually dedming to 5100 per diare.

(c) %c Company stxicemal this series on January 21,1997.

(d) In the event of voluntary liquidarkm, $ 105.50.

(c) On or after August 1,1998.

Ser Notes ta linancialStatemenn on pages 29 thmugh .%

27

-. ._ _ _ . _ _ _._ _ _ . . . _ ._ _ _ . . _ . . _ _ .m_ _ . _. . ,

I r

.T Statement Of Retained Earnings i

rikaand, orasn>

Year Ended December 31, E j '

Balance at Beginning of Period E i $1,040,766 $ 977,880 .

Add: d .1 Net income 7, 314,107 320,757 N"__ _g 1,354,873 1,298,637 Deduct:  !;

@g @FmA Preferred stock dividends

• Common stock cash dividends- $2.51, $2.455 and $2.395 bdtt$(. 13,250 250,714 13,252 l "2 244,586 Per share, respectuely Ig%381u-.p g - 4 Capital stock expense <

d -

33  !

O f 269,2721 263,964 257,871 BALANCE AT CIDSE OF PEnsoD E $1,126,513 4 $1,090,909 $1,040,766 (Under monpge indentures as amended. $34,435,000 of total retained earniny was restricted apinst payment of common dividends -

except those payabi- in common stock. leaving $1,092,078,000 of free and unrestricted retal.wd rarning at December 31,1996.)

• Preferred stock dividends include dividends declared, applicable to subsequent periods.

J Selected Quarterly Information (Unaudited) j (Tkuands ofDollan Except l\re.%e Amounal Opeuting Operating Net Earnings on Earnings Per Revenues income Income Common Stock Share of Stock

, QUAMRENDED: Outstanding kNNENbMN$$E'",t'3?M55M2d3MMEAE='"

March 31,1995 475,053 67 306 38,224 34,911 0.34 1

%~

L F, tW.2 - FWB,& n- ,' JS. NK. W"GL

.. n - J W , ~n%"!MlRBfMMT7W;.-

a~ sw R.. ls

- June 30,1995 ' 547,800 107,160- 76,035 72,722 0.71 .

kNN 1 756,565 Id b M E N id M N O $ N E E 2Ed$ N 213,523 . 172,607 September 30,1995 169,295 1.66'

( DecemberbMk 31,1995 462,946 NsNi 53,907 bE$kE1 M7bddN 27,241 23,929 0.24 The first and second quarters of 1996 included credits to Missouri electric customers which reduced net income and earning on common stock approximately $13.5 million and $32 million. or 84 per share and 188 per share, respectively. In addition, a 1.8% 1995 rate decsease for Missouri electric customers reduced net income and earninp on common stock for rhe first, second and third quaners of 1996 by $4.2 million, $5.2 million and $2.5 million, or 48 per share,54 per share and 34 per share, respectively. Founh quarter 1996 included Callaway plant refueling expenses which decreased net income and earning on common stock approximately $18 million, or 184 per share. Second quarter 1995 included Callaway plant refueling expenses which decreased net income and earning on common stuck approximately $20 million, or 204 per share. Third quaner 1995 reflected a one-time credit to Missouri electric customers which reduced net income and earnings on :ommon stock approximately $18 million. or 184 per share. In addition, the 1995 rate decrease reduced net income and earnings on common stock $4 million, or 48 per sare, in both the third and fourth quanen of 1995. Aho, merger-related expenses of $9 milhon, widch were classified in other inconw and deductions, reduced net income and eaminp on common stuck approximately 98 per share in the third rearter of 1995. Other changes in quarterly earning are due to the effect of weather on sales and other factors that are j characteristic ofpublic utility operations.

l:

See Notes a FinanchelSraremena onpages 29 shrough %

M l.

I 28 t-e-

I~

1 a n o A . ... . - k.L i 1

i i

Notes To Financial Statements Note 1 - Summary of Accounting Policies the same manner as construction charges for labor and materials. l The Company is regulated by the Missouri Public Service Under accepted rate-making practice, cash recovery ofAFC, Commission (MoPSC), Illinois Commerce Commission as well as other construction costs, occurs when completed (ICC), and the Federal Frergy Regulatory Commission projects are placed in service and reflected in customer rates.

(FERC). The accounting policies ofGe Company are in AFC rates are determined by the Company consistent with accordance with the raremaking practices of the regulatory the methodology prescribed by the FERC. Average annual AFC authorities having jurisdiction and, as such, conform to rates were 9.0% in 1996,9.3% in 1995 and 8.9% in 1994.

generally accepted accounting principles, as applied to regulated public utilities. Following is a description of the Unamortized Debt Discount, Premium and Expense Company's significant accounting policies: Discount, premium and expense associated with long-term debt are amortized over the lives of the related issues.

Property and Plant The cost of additions to and betterments of units of property I tevenue and plant is capitalized. Cost indudes labor, material, Che Company accrues on its F.,ks estimated, but applicable taxes, and overheads, plus an allowance for funds unbilled, revenue.

used during construction. Maintenance expenditures and the Operating Revenues indude excise taxes of $99.3 million, renewal ofitems not considered units ofproperty are charged $99.2 million and $97.9 million for the years 1996,1995 and ,

to income as incurred. When units ofdepreciable propeny are 1994, respectively.

retired, the original mst and removal cost, less salvage, are charged to accumulated depreciation. Stock Compensation Plans The Company applies Accounting Principles Board Opinion Depreciation No. 25, " Accounting for Stock Issued to Employees' (ABP 25)

Depreciation is provided over the estimated lives of the various in accounting for its plans.

dasses of depreciable property by applying composite rates on a straight-line basis. The provision for depreciation in 1996, Use of Estimates 1995 and 1994 was approximately 3% of the average The preparation of financial statements in conformity with depreciable cost. generally accepted accounting principles requires management to make cenain estimates and assumptions. Such estimates Nuclear Fuel and assumptions may affect reported amounts of assets and The cost of nudear fuel is amonized to fuel expense on a unit- liabilities and disclosure of contingent assets and liabilities at of-production basis. Spen fuel disposal cost is charged to the date of the financial statemeats and the reported amounts expense based on kilowarthours sold. of revenues and expenses during the reponed period. Actual results could differ from those estimates.

Income Taxes Deferred tax assets and liabilities are recognized for the tax Reclassifications consequences of transactions that have been treated differently Certain reclauifications have been made to prior-year financial for financial reporting and tax return purposes, measured using statements to conform with 1996 reporting (see Note 3 -

statutory tax rates. Regulatory Matters).

Investment tax cre. lits utilized in prior years were deferred and are being amonized over the useful lives of the properties Note 2 - Merger Agreement to which they relate. On August 11,1995, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with CIPSCO Allowance for Funds Used During Construction Incorporated (CIPSCO) and Ameren Corporation (Ameren), a Allowance for funds used during construction (& )is a utility newly formed entity, 50% owned by the Company and 50%

industry accounting practice whereby the cost of borrowed owned by CIPSCO, pursuant to which, among other things, funds and the mst ofequity funds (p eferred and common the Company and CIPSCO will be merged with Ameren (the stockholders' equity) applicable to the Company's mnstruction Merger). Subsequent to the Merger, the Comp:.ny and Central program are capitalized as a cost ofmnstruction. His Illinois Public Service Company (CIPS) and CIPSCO accounting practice offsets the effect on earnings of the cost of Investment Company (wholly owned subsidiaries of CIPSCO),

financing current construction, and treats such financing costs in will continue as wholly owned operating subsidiaries of 29

1

[ Notes To Financial Statements Ameren. As a resuk of the Merger, each outstanding share of million cedit to retail Missouri electric customers reduced the Company's common stock will be converted into the right 1995 eart ings approximately 18 cents per share. Aho to receive one share of.Ameren Common Stock; each included is a three-year experimental alternative regulation outstanding share of the Company's preferred stock wi!! remain plan that provides that earnings in any future years in excess outstanding and unchanged; and each outstanding share of of a 12.61% regulatory return on equity (ROE) will be shared CIPSCO's common stock will be converted into the right to equally between customers and stockholders, and earnings receive 1.03 shares of Ameren Common Stock (or cash in lieu above a 14% ROE will be credited to customers. The of fractional shares). The Merger is expected to be tax. free for formula for computing the credit uses twelve-month results income tax purposes and will be accounted for under the ending June 30, rather than calendar year carnings. The

" pooling ofinterests" method of accounting. agreement also provides that no party shall file for a general With their execution and delivery of the Merger Agreement, increase or decrease in the Company's Missouri retail electric the Company and CIPSCO entered into stock option rates prior to July 1,1998, except that the Company may file agreements, pursuant to one of which the Company granted for an increase if certain adverse events occur. During 1996, CIPSCO the right, upon the terms and subject to the the Company recorded a $47 million credit for the first year conditions set forth therein, to purchase up to 6,983,'!33 shares of the plan, which reduced earnings by $28 million, or 27 of the Company's common stock at a price of $35.94 per share- cents per share. This credit was reflected as a reduction in Pursuant to the other agreements, CIPSCO panted the electric revenues. At this time, the Company is unable to Company the right, upon the terms and subject so the determine whether it will be required to make any future l conditions set forth therein, to purchase up to 6,779,838 shares credits to its cus.omers under the agreement.

of CIPSCO common stock at a price of $37.02 per share- In 1995, the Company filed an application with the l These optiom will expire upon consummation of the Merger. MoPSC for approval of the Merger. On July 12,1996, a l Afier the Merger, Ameren will become a registered public joint agreement was filed with the MoPSC that recommends utility holding company under the Public Utility HoldinS approval of the merger between the Company and CIPSCO.

Company Act of 1935, as amended. In December 1995, the The Company, the Missouri Public Service Commission sta&,  ;

Merger was approved by the shareholders of Union Electric and the Office of the Public Counsel, several customer groups and CIPSCO. However, the Merger is still conditioned upon, others signed the agreement. Agreement provisions include a among other things, receipt ofcertain regulatory and new three-year experimental ahernative regulation plan that governmental approvals (See Note 3 - Regulatory Matters). would run from July 1,1998, through June 30,2001. Like The following unaudhed pro forma financial information the current plan, the new plan provides that earnings over a reflects the effects of combining Union Electric and CIPSCO 12.61% ROE up to a 14% ROE would be shared equally into Ameren under the pooling ofinterests method of between customers and shareholders. The new three-year accountitig. plan would also return to customers 90% of all earnings Year ended December 31 (in thousands except per share l above a 14% ROE up to a 16% ROE. Earnings above a 16%

amounts): I ROE would be credited entirely to customers. Other p P19964 1995 1994 agreement provisions include: recovery over a 10-year period tv-smo Total revenues t $ 3,333,505 g 5 3,240,923 $ 3,269,4'i f the Mssoun ponkn dan esumated $y ndon d merger-related expenses; a Missoun elecinc rate decrease, Net income 1 $ e 371,684 L $ 372,872 $ 39;,459 effective September 1,1998, based on the weather-adjusted Earnings per shan- $2.71 $2.72 $2.85 average annual credits to customers under the current experimental ahernative regulation plan; and an experimental The pro forma financial information consolidates the retail whccling pilot program for 100 megawatts of electric financial resuhs of Electric Energy Inc. (EEI), which will be power. Also, as part of the agreement, the Company would 60% owned by Ameren subsequent to the merger as a result not seek to recover in Missouri the merger premium. The of the current ownership interests in eel by Union Electric exclusion of the merger premium from rates would not result and CIPS. in a charge to earnings. On September 25,1996, the MoPSC ord-red that additional information be filed in November Note 3 - Regulatory Matters IW6 in connection with the merger proceeding.

On July 21,1995, the MoPSC approved an agreement in 1995, the Company and CIPSCO filed joint l involving the Company's Missouri electric rates. The applications for approval of the merger with the ICC and the l agreement decreased rates 1.8% for all classes of Missouri retail FERC. In those applications the Company and CIPSCO are electric customers, effective August 1,1995, reducing annual requesting a sharing of merger savings, net of merger revenues by about $30 million and reducing annual carnings by premium and merger expeases, between ratepayers and approximately 18 cents per share. In addition, a one-time $30 shareholders for the first 16 years subsequent to the Merger.

30

l ..

On November 7,1996, a liearing Examiner for the ICC At December 31, the Company had recorded the following issued a proposed order in connection with the Company and regulatory assets and regulatory liability (in thousands):

CIPSCO's merger proceedings. In the proposed order, the V -I g 1995 11 earing Examiner recommended that the merger between the Regtdatory Assets: f pfd Company and CIPSCO be approved. In addition, the Hearing Income taxes Examiner recommended that a decision on the Company and Callaway costs [($692,171l 111,088f 115,079$732,58 CIPSCO's proposals for sharing ner merger savings be made after Contract termination costs $119/90 25,806 the merger. The Company and CIPSCO would be required to DOE decommissioning assessment kl7,916! 19,505 file a rate case or alternative regulation plan within one year Unamortized loss on reacquired Jebt ! /30,266j 33,203 after closing of the merger whereby an appropriate sharing of "Thtal regulatory assets  ?$870,931i $926,173 net merger savings between stockholders and customers would Regulatory Liability:

be determined at that time. On January 27,1997, the ICC Income taxes '$203,822; $216,502 ordered that additional information be fded in connection with the merger proceedings. Income Taxes: See Note 8 - Income Taxes.

On October 16,1996, the FERC set the proposed merger Callaway Costs: Represents Callaway nuclear plant operations for hearing. The FERC directed the presiding administrative and maintenance expenses, property taxes and carrying costs incurred between the plant in-service date and the date the law judge (ALJ) in the case to issue an initial decision no later plant was reflected n rates. These costs are being amortized than April 30,1997.

On December 18,1996, the FERC issued Order 592

"*" #'#**" P '"' ""b

, Contract Termm."8 atmn Costs: Represents costs incurred for relating to the Comnu. .ssmn s merger policy. The Company terminating a nuclear fuel purchase contract. These costs are believes its proposed merger with CIPSCO meets the criteria being amortized over the a @ing life of the terminated set forth in Order 592, but the effect of this order on the contract (through 2001).

timing of the ALJ's initial decision is uncertain.

Department of Energy (DOE) Decommissioning Assessment:

In October 1996 ihe Company and CIPSCO fded an Represents fees assessed by the DOE to decommission its application with the Securities and Exchange Commission for uranium enrichment facility. These costs are being amortized approval of the Merger pursuant to the Public Utility Holding through 2007 as payments are made to the DOE.

Company Act of 1935. Unamortized Loss On Reacquired Debt: Represents losses At this time, the Company expects to receive all required related to refunded debt. These amounts are being amortized regulatory approvals and to complete the merger by the end over the lives of the related new debt issues or the remaining of1997. lives of the old debt issues if no new debt was issued.

On April 24,1996, the FERC issued Order 888 and Order The Company continually assesses the recoverability ofits 889 related to the industry's wholesale electric business. On regulatory assets. Under current accounting standards, July 9,1996, the Company fded an open access tariff under regulatory assets are written off to earnings when it is no Order 888. On September 25,1996, the FERC set the open longer probable that such amounts will be recovered through access tariff filing for hearing. The hearings are scheduled to fumre revenues.

begin May 1997.

In October 1996 the Company resolved various financial Note 4 - Debt Retirement Provisions reporting matters with the FERC. The resolution of these During the five years from December 31,1996, the amour.ts of debt maturities totaling $174 million are: $74 million in 1997; matters resuhed in the reclassification of certain costs from and $100 milhon m 1999. Amounts for years subsequent to electnc plant and nuclear fuel m. process to other regulatory .

1997 do not mclude nuclear fuel lease payments since the assets, as well as the reclassifican.on ofinterchange sales from amounts of such payments are not currendy determinable.

purchased power expenses to electric revenues. These reclassifications were made to all pnor-year financial Note 5 - Short Term Borrowings statements to conform with 1996 reporting. These Short-term borrowings of the Company consist of bank loans reclassifications did not have a material effect on the (maturities generally on an overnight basis) and commercial Company's financial position, results of operations or liquidity. papet (maturities generally within 10-45 days). At December in accordance with SFAS No. 71, " Accounting for the 31,1996, $11.3 million of bank loans were outstanding.The Effects of Certain Types of Regulation " the Company has weighted average interest rates on borrowings outstanding at deferred certain costs pursuant to actions ofits regulators, and December 31,1996 and 1995, were 7.1% and 6.1%

is recovering such costs in electric rates charged to customers. respectively.

31

.I I 1

i Notes To Financial Statements At December 31,1996, the Company had committed Principal reasons such rates difTer from the statutory bank lines of credit aggregating $ 179 miUion (of which federal rate:

$168 million were unused) which make available interim p1996' , 1995 1994 fmancing at various rates ofinterest based on LIBOR, the bank certificate of deposit rate, or other options. These lines Statutory federal income tax rate

$M

( 35%] 35% 35 %

ofcredit are renewable annually at various dates throughout Increases (Decreases) from:

.[]

the year. Depreciation differences j [2s j 2 1 State tax i^4~' 4 4 Note 6 - Nuclear Fuel lease Msceu ne us, net (2) (1) (1)

The Company has a lease agreement which provides for the Effective income tax rate 39% 40% 39 %

financing of nuclear fuel. At December 31,1996, the maximum amount that could be fmanced under the Inc me tax expense c mp nents (in thousands):

agreement was $120 million. Pursuant to the terms of the p , gg96i 1995 1994 lease, the Company has assigned to the lessor certain Taxes currently payable y r contracts for purchase of nuclear fuel. The lessor obtains, (principally federal): 1) g , y through the issuance of commercial paper or from direct Induded in operating s .,S loans under a committed revolving credit agreement from expenses ,3% $222,492 $232,811 commercial banks, the necessary funds to purchase the fuel Induded in other income- g sceHane us, net M (1,947])j(2,949) (4,373) and make interest payments when due, The Company is obligated to reimburse the lessor for all Deferred taxes expenditures for nuclear fuel, interest and related costs.

Obligations under this lease become due as the nudcar fuel is (principally federal)- h,j l Induded in operating b j  ;

consumed at the Company's Callaway nuclear plant. The expenses - {j Company reimbursed the lessor $37.5 million during 1996, Depreciation differences p : 2,0973 4,767 (1,485)

$34.1 million during 1995 and $34.5 million during 1994. Postrethement benefits [

Other H

2,063 4 (9,022)

(2,515)

(9.928)

(8,795)

The Company has capitalized the cost, including certain [ '

interest costs, of the leased nuclear fuel and has recorded the Induded in otherincome- b l related lease obligation. During the years 1996,1995 and Depreciation differences l ;693j 752 816 1994, the total interest charges under the lease were $5.8 Other i ' 95 4 390 963 million, $5.8 milhon and $5.2 million, respectively (based on 4,948 ; (5,628) (18,429)

D'

average interest rates of 5.7%,6.1% and 4.7%, respectively)

• 8'{"* ***

of which $3.4 million, $2.5 million and $2.7 million, Induded in operating respectively, were capitalized. expenses (6,182) ' (6,181) (6,182)

Totalincome tax expense ' $196,210 $207,734 $203,827 Note 7- Preferred Stod The Company retired 260 shares,56.30 Series preferred The Company recognizes the income tax efTects of stock in each of the years 1996,1995 and 1994. temporary differences. Prior to 1993,in accordance with On January 21,1997, the Company redeemed $63.9 accepted ratemaking practice, deferred income taxes were not million of preferred nock (see Statement of Preferred Stock provided for certain temporary differences flowed through to for preferred stock series redeemed). customers and the equity component of AFC. In accordance with SFAS No.109, " Accounting for Income Taxes," a Note 8 - Income Taxes regulatory asser, representing the probable recovery from customers of future income taxes which is expected to occur Total income tax expense for 1996 resulted in an effective tax when temporary differences reverse, was recorded along with a rate of 39% on earnings before income taxes (40% in 1995 corresponding deferred tax liability. Also, a regulatory liability, and 39% in 1994).

recognizing the lower expected revenue resuhing from reduced income taxes asociated with amortizing accumulated deferred investment tax credits, was recorded.

32

, W M A n 1 K. a The Company adjusts its deferred tax liabilities for changes Comporents 4 pension costs (in millions):

enacted in tax laws or rates. Recognizing that reguh.. ars will .

t1996 r 1995 1994 probably reduce future revenues for deferred tax liabilities Service cost - benefits earned , , . . .

initially recorded at rates in excess of the current statutory rate, during the period [$22u $ 19 $ 21 reductions in the deferred tax liability were credited to the Interest cost on projected ..

regulatory liability. benefit obliganon ~ 65' 66 60 Actual return on plan assets - (107) ' (166) 8 Temporary differences gave rise to the followm.g deferred tax Net amortization and deferral 48 107 (58) assets and deferrol tax liabilities at December 31 (in millions): Pension cost $ 28 $ 26 $ 31 0 3996 1995 Assumptians for actuarial present value of r.iojected benefit Accumulated Deferred Income Taxes: 1 obligations:

h Depreciation  ; $ L 826] $ 819

'  !~1996 1995 1994 Regulatory asset, net 488 516 Discount rate at measurement date o 7.5 % ; 7.25 % 8.5%

Capitalized taxes and expenses , .107 ' 113 Increase in future compensation l 4.5% 4.25 % 5.5%

Deferred benefit costs i - (48)! (52) Plan assets long-term rate of return 8.5% 8.5% 8.5%

Disallowed plant costs (11)' (11) In addition to providing pension benefits, the Company Total net accumulated deferred provides certain health care and life insurance benefits for retired income tax liabilities $1,362 $1,385 employees. Substantially all of the Companys employees may become eligible for those benefits if they reach retirement age Note 9 - Retirement llenefits while working for the Company. The Company's funding policy I he Company has non-contributory, defined-benefit is to contribute annually the net periodic cost. Plan assets consist retirement plans covering substantially all ofits employees.

principally of common stocks and fixed income securities.

llenefits are based on the employees' years of service and The Company accrues the expected postretirement benefit compensation. The Company's funding policy is to contribute costs during employees' years of service. Postretirement benefit annually at least the minimum amount required by government costs were $44 million for each of the years 1996 and 1995 and funding standards, but not more than cem be deducted for federal

$46 million for 1994, of which approximately 19% was charged income taxes. Plan assets consist principally ofcommon stocks to construction accounts in each of the three years. The and fixed income securities.

Compan/s transition obligation at December 31,1996, is being Pension costs for the years 1996,1995 and 1994, were $28 amortized over the next 16 years.

million, $26 million and $31 million, respectively, ofwhich 19%

In August 1994, the MoPSC authorized the recovery of postre-was charged to construction accounts in 1996,20% in 1995 rirement benefit costs in rates to the extent that such costs are and 18% in 1994.

funded. In December 1995, the Company established two external Funded status of the plans at December 31 (in millions):

trust funds for retiree heahhcare and life insurance benefits. For both 1996- 1995 1994 1995 and 1994, actual claims paid were approximately $15 million.

resent value p In 1996, claims were paid out of the plan trust funds.

Actuarial ofbene [t obligation: >

. Funded status of the plans at December 31 (in millions):

Vested benefit obligation F$661- ... $679 $552 Accumulated benefit obligation i $752 : 5758 $622 N 1996? 1995 1994 Projected benefit obligation Accumulated postretirement benefit [

for service rendered to date '$919 $913 $779 obligatiom p yn.

Irss: Plan assets at fair value 924- 847 706 Acuve employees eligible for benefits F $ . 38 l $ 74 $ 42

, (Excess) Deficiency of fan assets versus : Retired employees '193l 211 188 projected benefit obbgation l (5) 66 73 Orher active employees L80: 32 60 Unrecognized net gain .96 ' 22 18 Total benefit obligation z311 317 290 Prior service cost not yet n: Man anas at fair marka value 47- 14 -

recognized in net periodic Accumulated postretirement twnefit pension cost (76) (82) (89) obligation in excess of plan assets 264 303 290 Unrecognized net assets Unrecognized - transition obligation (200) (213) (225) at transition 8 9 10 - gain /(loss) 19 (7) 4 Accrued pension cost $ 23 $ 15 $ 12 Postretirement benefit liability $ 83 $ 83 $ 69 33

1 Notes To Financial Statements j Components of net periodic postretirement benefit costs 1996 (in millions): Options outstanding at beginning of the year :142,500)

19964 1995 1994 Options granted during the year '165,5901 Service cost - benefits earned , Options exercised during the year -;

during the period $ 11 t$ 12{ $ 10 Options expired / cancelled during the year 4 700i Options outstanding at end of the year 307,390, INefitYligSt '22 24 21 (4); Options exercisable at end of the year -39,710 Actual return on plan assets - __

Amortization-transition obligation 12 : 12 13 Exercise price of options granted $ 43

-unrecognized (gain)/ loss (1)l (2) 1 Deferred gain 3 - -

Net periodic cost $ 44 $ 44 5 46 In acc rdance with APB 25, no compensation cost ha3 been recognized for the Company's stock compensation plans. In Assumptions for the obligation measurements: 1996, Union Electric adopted the disclosure-only method under SFAS 123, " Accounting for Stock-Based Compensation."

b 19968 1995 1994 If the fair value based accounting method under this statement Discount rate at measurement date z 7.5% I7.25% 8.5%

had been used to account for stock-based compensation cost, Plan assets long-term rate of return 8.5%l 8.5% -

Medical cost trend rate-initial 8.25 % 1 9.25 % 11.0 % the effects on 1996 and 1995 net income and earnings per

- ultimate  ! 5.25% l 5.25% 6.0% share would have been immaterial Ultimate medical cost trend rate expected in year 2000 2000 2000 Note 11 - Commitments A 1% increase in the medical cost trend rate is estimated The Company is engaged in a construction program under to increase the net periodic cost and the accumulated which expenditures averaging approximately $267 million, postretirement benefit obligation by approximately $3 million including AFC, are anticipated during each of the next  ;

and $23 million, respectively. five years.

The Company has commitments for the purchase of coal Note 10 - Stock Option Plans In April,1995, the Company's shareholders approved a lung. under long-term contracts. Coal contract commitments, Term Incentive Plan (the Plan) for eligible employees, as including transportation costs, for 1997 through 2001 are determined by the Human Resources Committee of the Board. estimated to total $789 million (excluding contract escalation The Plan provides for the grant of options, performance awards, pmvisions). Total coal purchases, including transportation restricted stock, dividend equivalents and stock apprectauon c srs, f r 1996,1995 and 1994 were $270 milh.on,$293 rights. Under the terms of the Plan, options may be granted at a price not less than the fair market value of the shares at the date of million and $268 million, respectively. The Company also grant. Granted options vest over a period of five years, beginning has existing contracts with pipeline and natural gas suppliers at the date ofgrant, and provide for acceleration of exercisability to provide natural gas for distribution and electric generation.

of the options upon the occurrence of certain everits, including Gas-related contracted cost commitments for 1997 through retirement. Outstanding options expire on various dates through 2001 are estimated to total $99 million. Total deh.vered 2006. Under the Plan, subject to adjustment as provided in the Plan,2.5 million shares have been authorized to be issued or natural gas costs for 1996,1995 and 1994 were $64 million, delivered. The Company expects to make open market purchases $60 million and $63 million, respectively. The Company's ofits common stock to meet the requirements of the Plan. nuclear fuel commitments for 1997 through 2001, including Summary of stock options: uranium concentrates, conversion, enrichment and fabrication, are expected to total $126 million, and are

, 1995 expected to be financed under the nuclear fuellease. Nuclear Options outstanding at beginning of the year _

142,500 fuel expenditures for 1996,1995 and 1994 were $51 million, Options granted during the year

$42 million and $30 million, respectively. In addition, the Options exercised during the year -

Company has long-term contracts with other utilities to Options expired / cancelled dun.ng the year -

purchase electric capacity.These commitments for 1997 Opu.ons outstanding at end of the year 142,500 through 2001 are estimated to total $201 m.llion.

i During Options exercisable at end of the year 9,800 1996,1995 and 1994, electric capacity purchases were $44 Exercise price range of options granted $35A-$35% i million, $42 million and $38 million, respectively.

34

r Note 12 - Contingencies significant revenue increases because the related capital costs, The Company's insurance coverage for its Callaway Plant at estimated at about $300 million, are largely offset by lower fuel December 31,1996 (in millions): costs. As ofyear-end 1996, about 84% of the Clean Air Act-related capital costs had been expended.

Type and Source of Coverage As of December 31,1996, the Company was designated a Maximum q ; Maximum s potentially responsible party (PRP) by federal and state Coverages ' Assessments - environmental protection agencies at four hazardous waste sites.

Other hazardous waste sites have been idemified for which the nc n Company may be responsible but has not been designated a Public Liability:

PRP. The Company continually reviews the remediation costs American Nudear Insurers J$ 200.0: $- -

in However, such costs 8,720.3' M fo f Pool Participation 79,3(a)-

are not expected to have a material adverse efTect on the

$8,920.3(b) - $ 79.3 C,ompany,s financial position, results of operations or liquidity.

Nuclear Worker Liability: -

Regulatory changes enacted and being considered at the American Nuclear insurers $ 200.0(c) $- 3.1 federal and state levels continue to change the structure of the Pmperty Damage: industry and utility regtdation, as well as encourage increased American Nuclear insurers $ 500.0 $ -

competition. At this time, the Company is unable to predict Nudear Electric Insurance lad. 2,250.0(d) 13.0 - the impact of these changes on the Company's future fmancial

$2,750.0 $ 13.0 condition, results ofoperations or liquidity.

Replacement Power: The Company is involved in legal and administrative Nudear Electric Insurance lad. $ 419.l(e) $ 3.3 proceedings before various courts and agencies with respect to (a) Retnwpective premium under the Price-Anderson liability pnwisions of matters arising in the ordinary course of business, some of which the Atomic Energy Act of 1954. as amended, (Price-Anderson). Subject involve substantial amounts.The Company believes that the fmal to reuospective assessmem with respect to k>ss fmm an incident at any U.S. reactor, payable at $10 million per year.

disposition of these proceedings will not have a material adverse (b) Limit ofliability for each incident under Price-Anderson. efTect on its financtal position, results ofoperations or h.qmdity.

(c) Total industry potential liability from worken claiming exposure to the hazard of nuclear radiation. The policy includes an automatic Note 13 - Callaway Nuclear Plant reinstatement thereby pmviding total coverage of $400 million.

Under the Nudear Waste Policy Act of 1982, the DOE is (d) Indudes premature decommmiomng costs.

(e) Weekly indemnity of $3.1 million, for 52 weeks which commences after responsible for the permanent storage and disposal of spent the first 21 weeks of an outage, plus $2.5 million per week for 104 nudear fuel. DOE currently charges one mill per nudear weeknhereafter.

generated kilowarthour sold for future disposal of spent fuel.

Price-Anderson limits the liability for claims from an incident Electric rates charged to customers provide for recovery of such involving any licensed U.S. nudcar facility. The limit is based on costs. DOE is not expected to have its permanent storage facility the number oflicensed reactors and is adjusted at least every five for spent fuel available until at least 2015. The Company has years based on the Consumer Price Index Utilities owning a suflicient storage capacity at the Callaway Plant site until 2005 nt. clear reactor cover this exposure through a combination of and has viable storage alternatives under consideration. Each private insurance and mandatory participation in a financial alternative willlikely require Nt: clear Regulatory Commission protection pool as established by Price-Anderson. approval and may require other regulatory approvals.The iflosses fmm a nudear incident at Callaway Plant exceed the delayed availability of DOE's disposal facility is not expected to limits of, or are not subject to, insurance, or if coverage is not adversely alTect the continued operation of Callaway Plant.

available, the Company will self-insure the risk. Although the Electric rates charged to c':stomers provide for recovery of Company has no reason to anticipate a serious nudear incident, Callaway Plant decommissioning costs over the life of the plant, if one did occur it could have a material but undeterminable  ;' based on an assumed 40-year life, ending with expiration of the adverse effect on the Company's financial pmition, results of plant's operating license in 2024.The Callaway site is assumed to operations or liquidity. be decommissioned using the DECON (immediate Under the Clean Air Act Amendmen of 1990, the dismantlement) method. Decommissioning costs, including Company is required to reduce total annual sulfur dioxide decontamination, dismantling and site restoration, are estimated emissions significantly by the year 2000. Significant reductions in to be $420 million in current year dollars and are expected to nitrogen oxide are also required. By switching to lowoulfur coal escalate appmximately 4% per year through the end of and early banking of emission credits, the Company anticipates decommissioning activity in 2033. Decommissioning cost is that it can comply with the requirements of the law without charged to depreciation expense over Callaway's service life and 35

~

[ Notes To Financial Statements amounted to $6.7 million in each of the years 1996,1995 and Carrying amounts and estimated fair values of preferred 1994. Every three years, the MoPSC requires the C<>mpany to stock and long-term debt at December 31 (in thousands):

fde updated cost studies for decommissioning Callaway, and 1996; electric rates may be adjusted at such times to reflect changed ki Y ,FairWluel Carrying 1995 1995 estimates. The latest study was performed in 1996. Costs Carrying 1 Fair Wlue collected from customers are deposited in an external trust fund Amount Amount to provide for Callaway's decommissioning. Fund earnings are Preferred se ck -3 219,121 $ 191,669!$ 219,147 $ 188,175 expected to average 9.25% annually through the date of long term debt $1,808,253 $1,846,948 $1,773,192 $1,876,424 decommissioning. If the assumed return on trust assets is not The Company has investments m debt and equity securities l

earned, the Company believes it is probable that such earnings that are held in trust funds for the purpose of funding the deficiency will be recovered in rates. Trust fund earnings, net of nuclear decommissioning of the Callaway nuclear plant (see expenses, appear on the balance sheet as increases in nuclear Note 13 - Callaway Nuclear Plant). The Company has decommissioning trust fund and in the accumulated provision classified these investments in debt and equity securities as for nuclear decommissioning. available for sale and has recorded all such investments at their The stafrof the Securities and Exchange Commission has fair market value at December 31,1996 and 1995. In 1996, questioned certain of the current accounting practices of the 1995 and 1994, the proceeds from the sale ofinvestments electric utility industry, regardig the recognition, measurement were $19.6 million, $9.4 million and $22.2 million, respectively.

and classification of decommissioning costs for nuclear Using the specific identification method to determine cost, the generating stations in the financial statements of electric gross realized gains on those sales were approximately $1 utilities. In response to these questions, the Financial Accounting million for 1996,1995 and 1994. Net realized and unrealized Standards Board has agreed to review the accounting for gains and losses are reflected in accumulated provision for removel costs, including decommissioning. If current electric nuclear decommissioning on the Balance Sheet, which is utility industry accounting practices for such decommissioning consistent with the method used by the Company to accotu.t for are changed, (1) the annual provisions for decommissioning the decommissioning costs recovered in rates.

could increase, and (2) trust fund income from the external Costs and fair values ofinvestments in debt and equity decommissioning trusts could be reported as investment securities in the nuclear decommissioning trust fund at income rather than as a reduction to decommissioning expense. December 31 (in thousands):

The Company does not expect that changes in the accountinS 1996 A

. Gross Unrealized :

for nuclear decommissioning costs will have a material efTect on  : Cost Security gpe Gain ' . (Loss) Fair %Iue' its financial position, results ofoperations or liquidity- Debt securities  ; $. 28,599.. $ 1,888 $ > - $30,487; Ex;uity snurities {40,343 : : 21,790 . w 62,133.

Note 14 - Fair %!ue of Financial Instruments Cash equivalents 3 981 --

-. 3,981_

l The following methods and assumptions were used to estimate $72,923 $23,678 ' $ $96,601 the fair value of each class of financial instruments for which it is practicable to estimate that value.

1995 Gross Unrealized Cash and Temporary Investments /Short-Term Borrowings Security type Cost Gain (Inss) Fair Wlue The carrying amounts approximate fair value because of the Debt securities $22,138 $ 2,642 $- $ 24,780 short-term maturity of these instruments. Equity securities 37,936 9,170 - 47,106 Cash equivalents 1 - ,5 Nuclear Decommissioning Trust Fund l

The fair value of the Companys nuclear decommissioning trust l

fund is estimated based on quoted market prices for securities.

l The contractual maturities ofinvestments in debt securities at Preferred Stock

. December 31,1996:

The fair value of the Company's preferred stock outstand.mg is estimated based on the quoted market prices for the same or Cost x Fair %lue similar issues. 1 ye r to 5 years  ;$ . 2,295 $_ 2,500 5 years to 10 years 2,843 - :2,979 Long-Term Debt 23,461 25,008 Due after 10 years The fair value of the Company's long-term de.nt is esumated -- -

$28,599 DD,18~/

based on the uoted market prices for the same or similar issues 7im wper and defiw,aal swenwna wnwnedkwin aw sub,mrtedpr de or on the current rates offered to the Company for debt of ,,,g,,,,,,,,, ,fgy ,,ggy,uj g, O,, ,,y a,, daw no, ,use,,ded ro indme, wh w comparable maturities. i

'""""'""""0""U"I'"f" " * * " " ' " " " " ' " "?""'

36

e

. UI mh Av. a RU v ~

Operating Statistics Year Ended December 31, 19% ( 1995 1994 1993 1992 Electric Operating Rewnues (000): 1 1 Residential [$; 840,459 j

$ 843,038 $ 800,117 $ 817,713 $ 754,667 Commercial g32,797j 725,438 705,505 684,446 676,761 Industrial - 382,9274 379,363 368,450 373,353 410,370 4%1esale 64,847 61,985 59,160 57,226

- -(67,663 :j Interchange p zl48,842j 139,657 167,822 154,033 84,905 Miscellaneous p l 35,4662 34,404 33,476 31,308 30,443 Credit to customers f I(47,339)l (32,638) -

Total Electric Operating Revenues $2,160,815 $2,154,109 $2,137,355 $2,120,013 $2,014,372 Kilowatthour Sales (000,000): s Residential -

11,549 1 11,229 10,619 10,867 9,690 i Commercial !ll' i12,111j 11,757 11,393 10,989 10,553 Industrial ,

18,685j 8,486 8,203 8,003 9,030 4%Iesale , a 1,794 'i 1,726 1,623 1,580 1,488 Interchange i7,000] 6,534 7,713 7,404 4,840 Miscellaneous I- 137? 137 137 139 145 Total Kilowatthour Sales 41,2763 39,869 39,688 38,982 35,746 Electric Customers (End ofyear):

Residential i 2 998,200 i 991,791 985,609 976,390 972,153 Commercial  : 132,968 j 130,557 128,505 126,542 125,196 Industriai (.

6,150 3 6.276 6,228 6,605 6,530 4hlesale -

'165 17 17 17 19 Miscellaneous 1.588 ? 1,628 1,628 1,630 1,599 Total Electric Customers 1,138,h22 ( 1,130,269 1,121,987 1,111,184 1,105,497 Residential Customer Data (Average):

Kilowarthours used 11,616 L 11,352 10,833 11,151 9,864 Annual electric bill - $84532 $852.27 $816.25 $839.11 $768.20 Revenue per kilowarthour 7,28c. 7.51e 7.54e 7.52c 7.79c Gross instantaneous e Peak Demand (Kilowatts) 8,085,000 : 7,965,000 7,430,000 7,540,000 7,135,000 Capability at Time of Peak, including Net Purchases (Kihmarts) '9,120,000 8,714,000 8,469,000 8,597,000 8,407,000 Generating Capability at Time of Peak (Kilowatts) 8,244,000 8,184,000 8,057,000 7,963,000 7,868,000 Coal Burned (Tons) 14,064,000 12,714,000 11,444,000 9,803,000 10,314,000 Price per Ton of Coal (Average) $20.59 - $22.59 $24.49 $31.66 $31.96 l

37

.. . . _ _ . __ . . _ - - - _ . _ _ . m _ _ _ _ - . - .. . . _ .

1 1

i

! Selected Financial Information (Thouuunds ofDollan Exel>t %m andl> %rr Amount, and Ratios)

R '1996h 1995 1994 1993

.Results of Operations (%ar Ended Deamter31): pM '

j. Operating revenues $2,242,364 $2,223,938 $2,220,037 Operating expenses g[$2,260,364l l,832,050? ,

1,800,468 1,777,,752 1,808,740 Operating income t 441,896 450,186 411,297 l Callaway rate phase-in plans ' bs 1428,314)..

x- - - -

l l- Deferred costs disallowed 9 -.- d - - -

Loss on cancellation of g l'

Callaway Unit No. 2, net Allowance for all funds used fF ,;.y

? - - -

during construction [ ~ 13,499 i , 12,933 11,280 11,544 ,

Gain on sales of electric property, net [ , ,L -) - - -

Miscellaneous, net 1(4,293)j (5,981) 403 3,919 '

.[

Interest " ('132,644): (134,741) (141,112) (129,600) h Net income  : 304,876 i 314,107 320,757 297,160 l Preferred stock dividends [ . )13,249J 13,250 13,252 14,087

! Earnings on common stock ' L 291,627, .. 300,857 307,505 283,073 ,

Average common shares outstanding Il02,l'23,834 0 102,123,834 -102,123,834 102,123,834 t

Assets, Obligations and Equiry Capital (At December 31):

Total assets p $6,870,809 $6,754,469 $6,624,701 $6,595,575 l long-term debt obligations fl,798,671 1,763,613 1,823,489 1,766,655 Preferred stock subject to  !'

mandatory redemption 1624 .650 '676 702 l Prefened stock not subject to >

! mandatory redemption ,

1218,497- 218,497 218,497 218,497 Common equity ' '2,354,8011 2,319,197 2,269,054 2,206,168 j' Financial Indices (Year Ended Deamler 31):

Earnings per share of common stock 1 (based on average shares outstanding) l $2.86 $2.95 $3.01 $2.77 Cash dividends per share of common stock - $2.51 .

$2.455 $2.395 $2.335 Return on average common stock equity 12.59 % 13.23 % 13.84 % 13.01 %

Ratio of earnings to fixed charges (a) 4' .68 -- 4.78 4.68 4.66 Book value per common share $23.061 522.71 $22.22 $21.60 l

I Capitalization Ratios (Ar Decemirr 31):

l' Common equity 53.9 % 53.9 % 52.6 % 52.6 %

Preferred stock not subject to mandatory redemption , 5.0 5.1 5.1 5.2

- Preferred stock subject to -

l mandatory redemption - - - -

long-term debt 41.1 41.0 42.3 42.2 ,

100.0 % 100.0 % 100.0 % 100.0 %

l ,

la) Strning medin amputing tlw maio ofearnings tofwddu,ges comist ofnet incomej>lmfwddurges (intemt on debt, amortuation ofdebt drumsnt. premium andexpeme andaportwn of,rntals urpmensatin oft /w intemtfaaer)andincome taxes.

38 4

e

, ut yp, A.s. z.

R. . s -

l 1

I l

1992 1991 1990 1989 1988 1987 1986

$2,100,026 $2,179,510 $2,104,210 $2,066,722 $2,090,810 $1,976,454 $1,856,635 1,688,009 1,696,697 1,646,670 1,600,254 1,606,656 1,488,000 1.337,025 412,017 482,813 457,540 466,468 484,154 488,454 519,610 60 107 237 227 2,408 92,791 59,861 (23,169) -

(30,196) - - -

8,022 8,519 14,145 17,908 14,885 20,477 15,812 18,099 - - - - - -

(l31) (2,718) 9,881 7,769 (l0,648) (l5,714) 3,947 (135,319) (167,209) (187,584) (176,571) (199,241) (228,961) (247,409) 302,748 321,512 294,219 285,605 291,558 333,878 351,821 14,058 14,059 14,693 19,134 30,425 36,522 49,245 288,690 307,453 279,526 266,471 261,133 297,356 302,576 102,123,834 102,123,834 102,123,834 102,123,834 102,123,834 102,123,834 102,123,834

$5,797,363 $5,733,479 $5,702,341 $5,760,322 $5,827,246 $5,957,811 $5,895,211 1,659,553 1,730,277 1,948,024 2,106,776 2,188,614 2,357,615 2,436,092 728 754 780 806 60,832 64,608 165,384 217,784 217,784 218,004 227,582 279,784 354,784 354,784 2,164,020 2,106,155 2,021,299 1,954,481 1,895,360 1,837,156 1,743,189

$2.83 $3.01 $2.74 $2.61 $2.56 $2.91 $2.96

$2.26 $2.18 $2.10 $2.02 $1.94 $1.92 $1.86 13.70 % 14.99 % 14.16 % 14.03 % 14.08 % 16.79 % 18.16 %

4M 4.21 3.57 3.63 3.3s 3.30 2.79

$21.19 $20.62 $19.79 $19.14 $18.56 $17.99 $17.07 53.5 % 51.9 % 48.3% 45.6 % 42.8 % 39.8 % 37.1 %

5.4 5.4 5.2 5.3 6.3 7.7 7.6 1.4 1.4 3.5 41.1 42.7 46.5 49.1 49.5 51.1 51.8 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

39

s t

e Directors And Officers Board of Directors Officers William E. Cornelius

• Charles W. Mueller

& Ment and Cin*ef&uutin offua Retired Chairrnan and ChiefErecutive Oflar

. w 1e ent-Enny Supply Savias reYe rI?arrman -

The Afay Department Storn Company Donald E. Brandt

'"'""" "'"'~ 0"""" #"' '"'l"" ""'"'

Thomas H.Jacohsen * "

Chainnan, kident and Chief &ecutive Ofar- Robert O. Piening Afacantile Bancorporation Inc., a bank holding company Senior Via 1%ident-l\rwer Operations Richard A. Liddy ** Donald E Schnell Clairman, Iveside'nt and ChiefEucutin Ofcer- Senior Via hident-Nuclear GeneralAmerican Lifelnsurance Company which Chades J. Schukai provida insuranaproducts andservias. Senior Via hident- Customer Services John Peters MacCarthy

• Retired Chainnan and ChiefSecutin Oficer -

Boatmens Trust Company M. Patricia Barrett Ma hident - Corporate Communications Paul L Miller,Jr. "

Char 1es A. Bremer ,

kident and ChiefSecutin OfL r - P L A1 iller &

Associates, a management consultingfirm. Vice1%ident-Information Technolog - l Charles W. Mueller . Donald W. Capone Ma kident- Enginaring ar,d Construction kident and ChiefEwcutin Oficer William J. Carr Robert H. Quenon Mce hident - Customer Servius - Regional Retirrd Chainnan ofthe Board- Peabody flolding Compay Inc. Jean M. Hannis Harvey Saligman "

Retired Chainnan ofthe Board- INTERCO Wdllam E.Jaudes INCORPOR,4TED. Vice kident and GeneralCounsd Janet McAfee Weakley. .. R. Alan Kelley kident -Janet AfcAfee, Inc., a residential Ma Pasident- E,nvy Supply realestate company MichaelJ. Montana

• Member of Executive Comminee Vice[%ident- Supply Servica

" Member of Auditing Committee Garry L Randolph Mce hident- Nuclear Operations Robert J. Schukai

Advisers to the Board gy p77,y,,,, _ p,,y,7 pt,y,,

Charles J. Dougherty William C. Shores Retired Chainnan and ChiefSecutive Ojiar. Uce &adent - Customer Services - Aferropolitan Isaac B. Grainger Samuel E. Willis Retired kident - ChemicalBank. Uce1%ident-IndustrialRelations Ronald C. Zdellar Ma hident - Customer Servien - Division Support Warner L Baxter Controlla Jerre E. Birdsong 7irasurrr James C. Thompson Secresary 40

. ..- . ~ - .. - - , . . - ~ -.

o 1 f l

.o:

Investor Information Annual Meeting Direct Deposit of Dividends j The Annual hicering ofStockholders will convene at All registered UE stockholders can have their cash I 9 a.m. Tuesday, April 22,1997, at Ibwell Symphony . dividends automatically credited to their bank accounts.

Hall,718 North Grand ik>ulevard, St. louis, Missouri. This service gives stocklmlders immediate access to their .

dividend on the dividend payment date and eliminates Comn. , Stock and Dividend Information the possibility oflost or stolen dividend checks.

)

The company's common stock is listed on the New York Stock Exchange (tic _ker symbol: UEP). Common Union Electric's Web Site stockholders ofrecord totaled 110,083 at December 31, To obtain UEP's daily stock price, recent financial 1996. Union Electric has paid cash dividends on statistics and other information about the company, visit . {

com_ mon stock for 91 consecutive years, since 1906. pE's home page on the internet. UE's web site address The following includes the high and low sales

• "'P#****"*"'

prices and the dividends paid per common share g,y,,,,,3,,y;,,,

1

- durhig the past two years:

Thompy's Imohins pains am available to help you each business day from 7:30 a.m. 4 1996 Pn.ce Range -l t 4:30 p.m. (Central'1ime). Please write or call:  ;

Quarter Ended sHigh:- Im > DN M March 31 c ~ t$44Vs; <$38%T LA62VA :: d Um. on Burn. eCompany juni30L  ;

f!4145 40%[ /438%

36; 762$g , j, invest r Services Department SeptemI>cr 3d December 31 - 404 36%

1624~

163g P.O. Box 66887

] <

St. Louis, MO 631666887 1995 Price Range St. louis area 554-3502 Quarter Ended High low Dividends Paid -

Tbil-free 1-800-255-2237 )

51 arch 31 $384 $34Y4 61e

June 30 374 35 61 September 30 37% 34% 61 l '

December 31 42 374 62g 1901 Chouteau Avenue l

i St. louis, MO 63103 i DRPlus j Through DRPlus -UE's dividend reinvestment Stock and First Mortgage Bond Transfer Agent l- and stock purchase plan - the company's stockholders, and Registrar l customers and employees can:

Union Electric Company l + make cash investments by check or automatic cash l payment, totaling up to $60,000, in UE common i Trustees for First Mortgage Bonds

stock annually

+ reinvest their dividends in UE common stock-or Boatmen's Trust Company St I*uis, MO receive UE dividends in cash

, '* place UE common stock certificates in safekeeping Harris Trust and Savings Bank and D.G. Donovan, and receive regular account statements...all without Co-Trustees paying any fees. Chicago, iL

, ik a ma a aga w au au ,awawaaa afa ,p ra, kp,,y a,aarsa,.

l 41 '

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Union Etscruic 33 P.O. Box 66149 St Louis, MO 63166 1

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