ULNRC-03775, 1997 Annual Rept for Union Electric
| ML20217B423 | |
| Person / Time | |
|---|---|
| Site: | Callaway  |
| Issue date: | 12/31/1997 |
| From: | Passwater A UNION ELECTRIC CO. |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| ULNRC-03775, ULNRC-3775, NUDOCS 9803260063 | |
| Download: ML20217B423 (64) | |
Text
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'? ,, s U fonEltetric one Ameren Plaza "g .i f ,, 1901 Chouteau Avenue Po Box 60149 St. Louis, MO 631646149 314 621.3222 March 17,1998 U.S. Nuclear Regulatory Commission Attn: Document Control Desk Mail Station PI-137 Washington, D.C. 20555-0001 )
i Gentlemen: ULNRC-03775
'$4 1 47gggg DOCKET NUMBER 50-483 CALLAWAY PLANT UE UNION ELECTRIC COMPANY ANNUAL FINANCIAL REPORT Transmitted herewith are twenty-five (25) copies of the Ameren Corporation / Union Electric Company 1997 Annual Re-port. This infonnation is submitted in accordance with i 10CFR50.71(b).
Very truly yours, 1
R Mt &a,% .w Alan C. Passwater j Manager, Licensing & Fuels I
! DES /mlo Attachment
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,,1. i , u U 9003260063 971231 j PDR ADOCK 05000483-I PDR a subsinfsary of Anseren Corporation
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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 Barry C. Westreich (2)
Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission 1 White Flint, North, Mail Stop 13E16 11555 Rockville Pike Rockville, MD 20852-2738 Manager, Electric Department Missouri Public Service Commission P.O. Box 360 !
Jefferson City, MO 65102
, Nuclear Energy Institute 1776 I Street N.W.
Suite 400 Washington, DC 20006-3708 4
- L-WAmerall 1997 AnnualReport 9
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I PositionedforSuccess
A Sna shot o Ameren orporation our ew am any s With 39 billion in assets. AmerenUE Power Plants AmerenCIPS Power Plants l'8 M 'D U4 M ppt for Mnke and M&uA Mann) (a# M #hnois)
Ameren ranks among the top Labadie Plant, Franklin County Newton Plant, Jasper County 25 investor-owned utilities in 2.300 megawatts 1,110 megawatts the Um,ted States. Ameren Coffeen Plant, Montgomery County Meramec Plant, St. Louis County operatmg mmpames overall BU megawatts 900 megawatts clearic rates are 14% behrw the Rush Island Plant, Jefferson County Meredosia Plant, Morgan County 1,158 megawatts 507 megawatts nationd average for investor.
Sioux Plant, St. Charles County Hutsonville Plant, Crawford County owned utilities, with its resi.
n2 nwgawans 156 nwgawans dential rates falling 17% hehrw Grand Tower Plant, Jackson County Venke Plant, Venice, IL that averaEe, its mmmercial 429 megawatts 186 megawatts rates 21% and its industrial Keokuk Plant, Keokuk,IA
, rates 9% hekiw that average. 125 megawatts Residentid customers osage Plant, Miller County 212 negawans auount for 35% of Ameren's electric revenues; industrial Taum Sauk Plant, Reynolds County 350 megawatts customers,16%; commercial p, customers,30%; interchange 1,137 megawatts customers,7%; eel customers, 7%; and wholesale and other customers,5% of the total.
AmerenUE serves 1.1 million .
. Q[f[y clearic cusromers in 66 ,
Missouri and four Illinoir
- counties and provides natural gas to 124,000 customers in 90 Missouri and three Illinois commanities. AmerenClPS pnivides clearicity to 323,000 cmtomers in $57 Illinois C ,
aunmunities and natural gas to 170,000 customers in 267 mmmunities - representing LUNOIS alout 7,N of the states popula.
tion and 35% of its surface area.
With 44,500 ujuare miles of service territory in Missouri and Illinois, the corporation's operating companies support 7.308 miles of natural gas mains and 42,204 pole miles of overhead transmission and nsas oty g distribution lines. The corpora-tion's operating companies are directly connected to 28 other electric utility systems.
Ameren has a 60% interest in Electric Energy, Inc. (EEI).
eel owra and operates an MISSOURI ciectric generating and tram-3 AmerenUE Service Area mission facility in Illinois that B AmerenCIPS Service Area supplies electric power to a uranium enrichment plant && Power Plants A Electric Energy,Inc. (EEI) located in Paducah, Kentucky.
x De inin Ameren TMW%M//J6f88 9 R 3
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Wekome to Ameren Corporation! .
Arnemn was (mated by the 199/ rnerger of Union Llectot .
Company and CIM,C O Inc orporated, parent c ompany of ApQ
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Spongfield ha'.ed Central IHinois Pubhr ServKe C ompany We c hose the narne to reflect our geographn roots and (ore '
hugne< s Amenc an energy inve'. tors in Ameren c ornmon stock wh noW find us on the fJew York Stoc k [rc hange under AEE not Ul P or CIP k f Aerger (ornplebon also brought new designations to $
Ameren C orporahoni operating ( orepanies Union fle( tnc '
r ompany becarne k nown as ArnerenUE and central llhnois Puh'n Serva e C ompany as AmerenCIVb Amnen a nmomente seery & n-ach townen Ilo//tNef, Tills RIH'f q4'r is about rntRh rnofe thdrl otirneW lod jo f Jr td h er Yyrnhol (Ito trierger hrirgjs togeth('r tho low.(ost energy pm/iders Arneren's eiet toc ubhty rates are 14% below the nanona .veraye for investor owned utmte, in f ac t. Ameren hQ ff>
el!VI ll M. lt J'b", arl viIf f! Lite ()urstl'rlq oIId'r erH'rQy-Ielaitt'd Ihisifies a oopono,coe and nom maa ennq tran -1,ons .Amemn [Nej eN f r,crq f, In( Bec ause of all of these deMoprnents, We (hose as our thorne f or the 199 7 annual report " Positioned for s,o c . To en.un. u suurssme emononue to ets
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Amd, humdmd, on emmunes .e seve. Amerenx opf' rating ( of f'lhtfiles anf} stil)sidiarles WiU Ief natri deepl/
(onannted to serv,nq < ustomers ethoent!v and effe<.ovely -
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vaAmerenCIPS memwammmmmma m e mraammmmam AmerenUE ranks as Missoun's AmerenCIPS prondes energy sernces fargest electnc utthly and is the tinrd to approumJtely 323,000 elecinc and latgest distnbutor of nJtuidlgdS In li0,000 naturJI gds Customers the StJ!e The company Jlso SetVes throughout a 20.000-squale-mile region four counhes in southwestem of centrJIand southern lihnois its llknots itS heddquattels are In _.
headquditels are in Spangheid IL ,
St Iouts A10
- l This subsidiary prondes administra hve support sernces - everntung A new energy mJrketing subsidi.ny from accounnng to infonnahon 1
Ameren [nergy wt!! pursue non utthly technology - to Ameren and its hustness opportanthes. locusing on operdhng companies and athhates powet m.ukehng transachons. setnng as a power marketing agent for the operdhng compJnies and pronding a rJnge of energy and nsk mJnagement set nces to (Jrgeted customers CIC directs non tegulated investments. including ledses securthes Jnd energy projects
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l tunem, r , n ,oMamd i C t. w f fer ( Lanle l .
Earrungs per Common $ hare 52,44 (10 0)% l Net income 5334,716,000 i99) l1 Laminrp per Cornrnon Share Before btraordinary Charge 52.82 41 h i-
. Incorne Before btraordtrkny C hargo 5386,536,000 40 [i Book Value per Cormnon Share 522.00 01
- Property and Plant (net) 56,987,085,000 05 -
Total OperatintJ Revenues 53,326,543,000 -
Total Kilowatthour Sdes 63,981,000,000 (0 7) 0 About Ameren -
With the merger of l'nion Ilet uit Com;uny and CIPs(:() Inunporated, a new holdmg iompany Amacn Corporaiion, hetame the parent of St. I ouiebased l'nion 1;lettrit Company (l!!J and Springlicid,11 based (:ciural Illinois Publit Scnite Company 4
(CIPS) - tinmcrly the prindpal operating (ompany of CIPNC() Intorporated. l'l{ and .
LIPS are now known as Amacoll and AmerenCIP5.
1Autt or Con:tms About the Cover i ng p gas ()n the smer is Ameren Corpor.nioni new logo - a visual exprewinn of the new n
/ Amen n # ar ts and homes '"'P"'d""ni identity. Ahhough in incaning is dchbaately open to imcrptciation, this 3 ouronan s t citer paphit landwape redeta ihe enap and hc.ndand oripns of Ainen n as the n.unc 6 Ant op it'nq ( uunmer Needs u dn a oin geopaphit soon and tore businew - Arnahan enagg Going Iorwoud, w'c ;
a nienamq r ne,qv artoenh.ps e
cxpni t ustomen anti iweston to awouate the Amercn name and corporaic identitv /
with sharchohict saluc,(plahty scnice and f.inantial strength.
io operannyin,oeno,andtne,tues 11 one,at:nq Uca"4 Who We Are 14 us no M nnolo7, in improve s"W"" Ni. I ouis lused Amacn Corpor,nion (NYSI,: Al 11 prmides enap scnites to 1.5 nulhon
!6 sethmionq who we Are cla irit .md 300.000 naural gas tusmmen in %ssomi .md ilhnoii. Appmsimmely 9M, of I/ Respons6hty f or i mani nil 5tatements the tom}uny\ $3.3 billion rescnues flow from clnitit ules, with the temainder f rom sales and sepor t of indepenaret An ountants of naural ps. The uompny pudes inch on a long, umcMut tradition of mu uimain- ,
18 Management's o u usu""
mau, h>w rocs and umiinuom tuuoma sense impmvemems.
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/4.( onsohdatea uaun, e sheet How We Did in 1997 26 Conuidati d statement t.f Income ()ur appf oximately H.I so Ameren cmployces suucwf ully expJHded the instal!Jtion o[ '
17 Conwhdated statement of rash Flows automated meten, carned high ratinp tiir sateiy and operating cttiany at (lallaway la consondated sta'ement of Nuticar Plam, and, with fewer emplmecs, shephaded the mager between Union Retaene f [ammm and selec ted ['ln tlit antl (IIP 5( '() Intiuporated through the final stages of the tegulanity prottu. Quarter S informatnin Y' 19 Noirs io consohdated r,nannai What's Ahead e statements \\'c tominue to prepare hir competition. remaining auive in etkris to shape both as sehtea consohdated I,naniial resuuuuring and emironmemal regulation and legidation to protett both our :E inf om ,at ion tuuoma, and sharcholJen. We u di hitus on auclaming maga sonings and scalizing i. 46 iM tm operating statntu s other espcnse icduuions. We expco in build upon the treation of our new encrgy 4/ c. n operatioq stat >un s mukaing subsidiary, Amacn i nagy, Inc. io scll both cicuriuty and natural gas and a .
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4s onetton and off nen range ot cncrgy sen ucs m targeted customen, and to use our pmition as a low-uist R-49 investor infor rnation unlity to respond to the thallenges of a more competitive environment. g
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l l l Earnings per Common Share Business Sales on ums> Commercial and indmtrial Kilowatthour Sales 52.90 27
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P~' t is2< 2.80 26 o 26 i I y g/7a _ 2 72 2n W 254 2 69 T' &'~ S 2.70 2a a 25 . e vn Q i s jk p j ';'l g l '97
'93 '94 '95 '96 '97 '93 '94 '95 '96
- Eetuaang enramuwy etwge or .w we ou stwe Fuel Costs < average cost on uowattnoun Competitive Rates (average resenue per kiiowattnour) 1Ac 8 93 9e 1 371 7 80 8
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"O 7 e6 1.3 7 61 6 08 1 194 1 198 l.2 a 79 5
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'93 '94 95 '96 '97 Residential Ccmmeraal m Ameren Operating Companies Average 3 National Average :At Jure 30,1997 - Echon Ekctw institutet l
l l l'roductivity (nunter of custmm per empe) Generation Capacity < net.in megawatts) , 220 10,000 2i7 8.9e l p 8,000 alo : 210
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i ' Charles W Mueller, chaorman, proudent end thnet eaetut,ve offner, Ame,en Corporetson To Our Owners plan for sharing earnings between shareholders and customers. y almost any measure,1997 was a Kilowaithour sales declined approximately remarkable - and demanding - year. 1%, primarily due to lower interchange market
- With the long-awaited completion of and residential sales, which decreased 13% and l
the merger between Union Electric and 1% respectively. However, commercial and CIPSCO Incorporated, we became Ameren industrial sales fbr the year rose 1% and 2% Corporation. Ameren is the parent company of respectively - thanks to a stable regional econ-two operating companies - Union Electric omy. Unemployment in the St. louis metro-Company, now known as AmerenUE, and politan area at year-end 1997 was just 3.5% ! Central lilinois Public Service Company, now compared to a 4.6% rate for the n: tion. Since known as AmerenCIPS. 1995, our region has added more than 55,000 new jobs. Metropolitan , e y St. louis ranked among i
>3 it politan areas and, in 1997, recorded a 6.3%
1997 linancial Performance employment growth rate - ahead of areas like in 1997, our company earned $335 million, Denver, Charlotte and San Antonio. or $2.44 per share. Earnings for 1997 included Recognizing that economic development an extraordinary charge of $52 million, net of increases revenues, we were instrumental in a income taxes, or 38 cents pu share, which number ofinitiatives, both in Illinois and resuhed from recent Illinois deregulation legis- Missouri, to attract commerce and industry to lation. Excluding the extraordinary charge, our service area. For example, in 1997 we earnings for 1997 were $2.82 per share, com- played a major role in attracting a Procter & pared to per-share earnings of $2.7) in 1996. Gamble plant that will bring 350 new jobs to Earnings were affected by several factors, southeast Missouri. including a $20 million credit expected to be distributed in 1998 to our Missouri electric Notable 1997 lients customers. That credit reduced 1997 per-share Our year was characterized by efficient use carnings 8 cents.The credit results from a of resources and expanded service options for 1995 agreement approved by the Missouri all customers. Public Service Commission. That agreement a in 1997, our Callaway Nuclear Plant, in a created an innovative alternatise rate regulation period ofincreased regulatory scrutiny, again j
,sd / bitte,=,4), hen 3
l ChrirmaniLetter earned excellent ratings from the Nuclear CIPSCO, retired at the end of 1997, after a Regulatory Commission. In fact, the Callaway 34-year career at the company; he remains plant had some of the highest scores awarded involved with Ameren as a member of the for any plant evaluated in 1997 - three " supe- newly named Ameren board of directors. Cliff rior" ratings and one " good mark. Callaway has capped his remarkable career with the for-remains one of the nation's safest plants. mation of Ameren Corporation, and we salute a Our AmerenUE pcwer plants continued him for his steadfast determination to lead his to use substantial quantities oflower cost, low- company through this process with dignity. sulfur W: stern coal, which greatly reduces sul-fur dioxide emissions. AmerenCIPS power Electric Industry Restructuring plants began preparations for testing the use of In Illinois Western coal and revamped controls to in Illinois, recently enacted legislation gives improve operational emciencies. customers the right to choose their electricity a Network meter reading units - automat- providers. Large commercial and industrial cus-ed electric meters that are read remotely - are tomers get provider choice by 1999, with all now in 550,000 homes and businesses in the business and residential customers able to St. l.ouis area. In 1997, we became the opera- choose providers by 2002. In addition, the law tor of the largest network meter reading system includes a provision that allows utilities to in the world. With this network, we can pro- recover a portion ofits stranded costs and gives vide greater information on customer usage, our Illinois residential electric customers a 5% respond to outages more quickly and offer a rate decrease, beginning August 1,1998. range of new customer services. In 1997, we Further rate decreases may be required in 2000 also installed 1,300 automated natural gas and 2002 if our Illinois electric rates do not meters. For both natural gas and electric ser- remain below the Midwest average. The new vice, we are working with the vendor involved law also removes the regulatory requirement that we file electric rate cases in Illinois - a condition of merger
\ow th a u, b in , umpla tal om ma y' w< .n e agn mn h approval that had been .m place.
fu,none un a ,olanaine m o en an i sanny, awl wahany otha > In addinon, the new law pro-i p, n u n du, tu"B vides the opportunity to climi-nate the retail fuel adjustment in this project to pioneer the introduction of clause and to roll into base rates a historical automated meters in rural areas. level of fuel expense, as well as the opportunity a The year also marked the formation of to securitize certain future revenues. our energy services and markcting company, Ameren Energy. This new affiliate will sell Electric Industry Restr.icturing energy - both electricity and natural ga;- In Missouri
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and a range of energy services to targeted in September 1997, we filed with the customers in new markets. We named an Missouri Public Service Commission a pro-experienced professional with expertise in posed structure for implementing a 100-energy marketing and risk management - megawatt pilot program that is designed to Shannon 11. Ilurchett - as the new president offer provider choice to a select number of of Ameren Energy. AmerenUE electric customers. The proposed u In December 1997, the Missouri Public pilot project would give us added experience Service Commission approved an increase in and information needed to manage the uansi-our Missouri natural gas rates, which annual ly tion to a competitive market. In addition, in will add $11.5 million to revenues, beginning 1997 a public service commission task force in the first quarter of 1998, and a state legislative committee began study-a Cliff Greenwalt, president r.nd CEO of ing approaches for creating competition in 4 Anem IW7 Annud Report l
Missouri. One of our senior officers is a mem- expenses related to new air quality standards. br of the task force; other executives serve as While I recognize that this is not encourag-advisers. The legislative committee may be ing news, this information does reflect the drafting a proposal in 1998, after the task force uncertainties Ameren and other energy compa-completes its study. We will continue to be nies face. Let me assure you that the Ameren very active in shaping these proposals so that management team will be redoubling its efforts Missouri will have an orderly transition to a to address and overcome the pressures on competitive era. future earnings. Now that we have completed our merger, we are aggressively focusing on
- Environmental Issues accelerating merger cost savings and realizing On the environmental front, the federal other expense reductions. We will continue to !
government has proposed or mandated several focus on developing our core energy business ) stringent, technically flawed reduction targets for additional growth opportunities. Also, with for emission of various gases -even though the formation of Ameren Energy, we expect to air quality has improved markedly since the maximize the value of our strategic generating passage of the Clean Air Act and its amendments. Science - has not shown that any of these \\< onH'unc '" h< o"nnuH olfo coha m n & L ch"hln rahn new stanbarbs Will significantly JWl "4ll h< n df Udh Ing on offm HmHon 10 NHnyINd!rdNn M improve public health, and ion d, ,"" y d , p"~ hh . s imposing them couki bc devas- ; tating to the nation's economy i and very costly to your company and its cus- assets and to increase earnings, both through tomers. We are working aggressively to oppose national marketing of electricity and natural such standards and to propose alternatives. gas and through the sale of a range of energy and risk management services. We continue to in Summary be committed to enhancing shareholder value ! Clearly, challenging times lie ahead for and will be capitalizing on opportunities to Ameren and the utility industry. Early in 1998, bring that value to you as soon as possible. we issued a news release cautioning investors Finally, our gratitude goes to our employees that 1998 carnings would likely be lower than and directors for their dedication and hard l 1997 earnings, excluding the extraordinary work in creating a new energy company. We I charge mentioned earlier. We cited several fac- appreciate your support over the past year, tors that are contributing to our projections, especially in this demanding period. including lower revenues, due to 1998 rate decreases in Missouri and Illinois. We als Sincerely, pointed to anticipated higher operations and maintenance expenses, including those for refueling Callaway in the spring of 1998 and for information system-related projects. In Charles W. Muelier addition, start-up costs associated with Ameren Chairman, President and Chief Executive Officer Energy will reduce 1998 earnings modestly. February 10,1998 l Earnings pressure may continue beyond l 1998 as the company and the entire electric i utility industry address the impact of a number l ofismes, including potentially lower revenues i and higher operating expenses associated with 1 industry restructuring, as well as potentially l higher capital expenditures and operating 3 nma s.,- s I
W'e are delivering aportfolio ofqualityproducts and services, while maintaining a clear identity, a consistently high level of quality and a singlepoint ofcontactfor key business customers. Forget flashy new models gle point of contact to the exper- customer, the greater the likeli-and features. tise of a team of prcifessionals. hood we can retain that cus-in the intensely competitive Why offer additional services tomer in a competitive market. world of auto manufacturing, the to an automaker? Because valued To attract new customers, business imperative is: slash your energy management services dif- Ameren is bidding for energy costs or else. ferentiate Ameren from its com- management services contracts petitors. And the lower our energy with multiple industrial and insti-rates and the more service rela- tutional customers. In addition, the l'OSl74 W/ /> / DH I,RDWlH tionships we maintain with each corporation's diversified energy services and marketing company 8 8 8 - Ameren Energy-will offer . nC a nf integrated solutions to customers' energy needs, selling electricity and natural gas in addition to . ustomer eeds Ameren's Abacus helps Ford N (.q .3, i and other business customers do ' e; . . . ' just that. % [ ..R$. # . Abacus is a wireless energy %:^
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i ?- management tool that allows customers to monitor energy use _...
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within each building, department or production process to help ?'
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them make informed operating s . decisions. C' ' Introduced in 1997, this wire. less, radio-based metering system ... helps the St. Louis Ford assembly
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plant managers track energy use .
.( f across the facility-from the -g" body shop to the paint shop and -
R beyond. In fact, Ford engineers in , 5 Detroit get simultaneous access to !.E the same data by logging on to a secure site on the Internet. ; #3 The project got its start with L.7 Mike Pitchford, Ameren key :' L' , " U, account executive and one of the executives charged with offering large industrial and commercial 1 - i ~ [. s . . e customers everything from a sin- ; '.
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) David Guartl who oversees devel-opment of new technology, and e Product Management Sup9tvisor Keith Brightfoeld (right) explore the offerings of Ameren% new Abacus product -- a worless energy nwn-ogement toolallowing customers ' to meanitor energy use by location or preduttion process. 6 Aween W Arma re recet
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Big River Zincs hard-charging AmerenUE nas improved reliability president may joke about his stint and offered a range of energy mining gold in South America, but advisory services to the Sauget he is dead serious about AmerenUE refinery. In 1997, AmerenUE electricity: Big River Zinc's President placed Big Rrver Zinc's plant George Obeldobel says his compa- expansion on a discounted eco-ny uses enough pom daily to nomic development rate. That 4% light a city of 20,000. expansion will increase Big River Electricity accounts for about Zinc's refining capacity almost 33% of the direct cost of refining 30%. Ameren's team members - the 92,000 tons of zinc produced lilhois District Sales Supervisor . annually at this Sauget, IL, manu- Bill Hutching > and Key Account facturer. Over the years, Executive Carrell Hughes-
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in 1997 AmerenUE centralized regional dispatching and installed new tethnology in each regoon to provide even faster response to customers when the lights go cut.
~ W' N are also exploring other rate struc- borrowers to financial institutions tures that would help this cus- interested in providing expedited r torner reduce energy costs, while equipment or project financing.
l benefiting your company. In tilinois, another Ameren Economic development was industrial development program i also the focus ci several other offers qualifying communities a l .nergy , a Partnershi
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marketing initiatives in Illinois, " ready-to-go-site" - with a com-where in 1997, we offered a range plete industrial infrastructure in of computer-based information place. Interested companies get sources to relocating or expanding blueprints, building speafications companies. Both in Illinois and and a color rendenng of a pre-Missouri, we brought prospective qualified building. Through yet another utility-community part-nership, Ameren is purchasing natural gas for municipal systems, , providing training to municipal g employees on gas systems and maintaining natural gas facilities for certain communities. In the end, we realize that both residential and business cus-tomers want low-priced, highly reliable energy and simple, hassle-free service - plus affordable products that match their needs. Kji Delivenng on all of this will keep our customers coming back to Ameren for more.;
"t At our Johnston City, IL. natural gas storage forld. Emma Cruthis. gas supply and transportation specialist, discusses pipeline suppIres with Koel Peebles, gas utslity journeyman storage operator.
Cruthis monitors and madets any underutilized capacity on our lines, selling excess capacity to ensure com-petitive pricing for natural gas distrib. uted by AmerenCIP$ and AmerenVL
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Ameren backs its commitment to protect the environment Am',',*",s
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wah action, significandy reducing emissionsfrom power 1,eid, in iiimo,s. ca, from the storage rields. i.ne { plants andinvesting in technology to carefidly monitor y,' "','y',' ^,",'j*,",,'g;,,, h, ",,",dg',g- , l water, so5 lank bahilat condition $. natural gas being deHvered by interstate pipelines and help cut costs by reducing the amount or pipeline capacity that must be held under contract. Granted, it may not be rwolution-ary - but a stroll through Ameren began using the centralized call center in Pawnee, IL, in a process
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d. P ]* e J*' operations captures the scope of that began in 1996 and was com- E e i some of our efficiency gains. pleted in July 1997. Moving to the call center concept allowed f 7
', y~,7 f P(ISIIION{ D F()R PI RFORMANCI AmerenCIPS to expand customer ; %; -
Operating ; p, c. 1 E"icientl 8 andE"ectivel Look first at the natural gas distribution business where Ameren is centralizing the pur-chase and scheduling of gas and ,i consolidating meter testing, 5 engineering design and material specification for Missouri and Ilknois gas systems. To accommo-date more flexible service offer-ings, both Ameren companies also remotely read natural gas meters at 300 large natural gas ' customers. A visit to regional locations , shows that the 1997 completion , of the AmerenCIPS reorganization from three divisions to eight regions has sharpened employees' focus on better service and ^, brought employees closer to cus-tomers. Each region's customers hl < f ngineer Richard $peraneo (left) and bers ofte n P an eams h ed with overhaulmg a turbine and han e e s ve y at he A evenCIPS plant. They are pictured here with the rotor of a recently refurbished drive turbine. PO Ame,n 19mi Annodi Repor t
service by making customer ser- Licensee Performance. overhaulin 28% fewer manhours vice representatives available for And at the AmerenCIPS Coffeen than were necessary for previous j longer hours. Thanks to a 1997 Plant, self-directed work teams outages. Compared to 1995 costs, AmerenCIPS call center link with orchestrated a major maintenance Coffeen reduced construction costs the AmerenUE customer service and repair effort, rebuilding a tur- 20% in 1997 through increased center, Ameren customers across bine and boiler, among other pro- monitoring and tracking of con- l both Illinois and Missouri can con- jects They completed the Unit 1
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, tions continued to win positive ,, y, ,,,,, 4, , ,,,4awfishit' nan M,ci,>ng < > tio<>g nr, mr /m vro rme widh x .
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power plants, like AmerenUE's Sioux Plant and AmerenCIPS' Coffeen Plant, The challenge at it was a deceptivaly simple solu- in addition to coal these plants was to delay-or tion to a devilishly difficult problem. By mid-1997, AmerenUE had stage-the burnirig of fuelin Thanks to engineenng ingenu- cut nitrogen oxide emissions at lower hvels of the boiler at tem-ity, AmerenUEt Sioux Plant its power plants by 50%, com- peratures where nitrogen and became one of the first U.S. pared to 1990 levek, while oxygen are less likely to combine. plants to improve technology increasing the amount of coal But those delays can cause prob-used for reducing nitrogen oxide burned by nearly a third. lems with corrosion of boiler (NOx) produced by cyclone boil- However, engineers across the tubes and the removal of molten ers. The cost for this "fix" was nation pondered what to do with slag, resulting in operating prob-nne<enth that of the next lowest cyclone bilers that mix air and lems in the cyclcne boiler. cost option -burning natural gas coal in a cyclonic motion at Teams from t'e Electric Power l u *~,,o m w
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l Research Institute, the industry's Ameren engineers designed and clean low su! fur Western coal into ) research arm, and AmerenUE installed an ingenious duct sys- the plant. Since the 1970s, spent morths with computer tem. They linked that system to AmerenUE has reduced by rnore models and boiler tests before the main air supply of the plant's than 65% the sulfur dioxide emit-boiler. Through a staged process, ted from its coa!-fired power rDaNg**$'tNI7d tfI[h these ducts divert some air away plants. AmerenCIPS has cut its sul-a simple solution - a duct system from the cyclone burners to a for dioxide emissions by 60%. different part of the boiler, while The need to reduce produc-Ir'ne"rUd/r't7ad!neDfa"of the boilser. Bahtnd this solution were Ameren ingineers (not shower, O ; Keith $tudmeyer) and, from left. j
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The 20th century began as a stated for installation by 1999. employees mastered the chal-period of war, grew into the Another technical milestone for lenges of this massive initiative, Atomic era and seems to be end- 1997 was the completion of 72 helping t.s operate efficiently as a ing as the Age of Technology. distirect projects to merge and unified corporation as soon as Ameren is using technology as integrate AmerenUE's and the merger was completed. This an important ally in improving ser- AmerenCIPS' business systems, effort, in addition to programs vice reliability and responsiveness. upgrade other systems and con- that placed new technology in in fact, AmerenUE now has solidate the two companies' data customer locations to improve the largest network meter reading centers where information pro- reliability, all brought not only cessing occurs. In 1997, Ameren increased efficiency but improved systern in the world, with 550,000
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1999, AmerenUE will have placed #W% automated meters in rnore than 800,000 customer sites, reducing costs in reading. maintaining and replacing meters. The system paves the way for such services as cM-peak priang, flexible billing options and an array of information and energy management systems. To provide this new service, AmerenUE contracted with CellNet f ! Data Systems of San Carlos, CA - the largest wireless, fixed-network data gathering and distnbution automation company in the U 5, The new technology is not lim-ited to electric customers. Installation of 1,300 automated meters for natural gas customers in AmerenUEt Wentzville, MO, District began in 1997. The year a!so marked the installation of 1he nes.ntiet Amerenut customers can now pay their bitos on the sneernet
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The pursuit of revenue and earnings growin gram cha!!enges employees to think about involves more than improving service, restruc- the energy business from the outside in. turing and cutting costs. It also requires These hands-on training sessions feature four-changing attitudes. by-six-foot customized learning maps that A number of initiatives are now in place to engage small groups of employees in a move employees toward operating as an inte- detailed analysis of customer satisfaction and loyalty, plus competitive trends and finanaal
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#* issues that we may be facing. uor, t8,n aooo Ameren Through this process, partici- *mP'*1*' * * ***"d'"9 sessions to encourage e e pants-led by fellow employees dialogue enc < discovery; they Rt n nf trained as meeting leaders - 8'"Si"9 **P"'ad'Y
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Throughout Ameren, employ-ees will continue to work in #'ljy,'y",7y7,7,;,,07,"' teams - often across operating xeny sereyso, oorsett tra,mng centu; companies, departments, regions grated team with a shared purpose and a and divisions -to harness the ((,Ig"c,,$"['$7,7,',"y,3 I power of different perspectives, experience $ island Planc and Quintella i renewed understandtng of the financial reakties **"#*'""*'"" I of a competitive environment. and skills. # Our development programs now focus on We are urging employees to take intelh- #'[lo#
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I defining values for success, understanding the gent nsks. We are encouraging them to needs of customers, developing leadership and approach their jobs with heightened market )d o . n Issianderant; ( ga building teamwork, trust and respect among understanding, greater creativity, a sense of ceorge mossey, tabadie } all employees, urgency and a renewed dedication to superior [y[,, *,"# , %'eg,g'jj,,,, g In fact, a newly created development pro- customer service;.3
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Responsibility orFinancialStatements FINANCIAL TABLE OF CONTENTS The management of Ameren Corporation is responsible for the information and 17 Responsibihty for Financial Statements representations contained in the consolidated financial statements and in other sections and Report of Independent of this Annual Report, The consolidaad financial statements have been prepared in Accountants conformity with generally accepted accounting prin;iples. Other information included in 18 Management's Discussion this report is consistent, where applicable, with the consolidred financial statements. and Analysis The Company maintains a system of internal accounting controls desigred to 24 Consondated Balance sheet provide reasonable assurance as to the integrity of the financial records and the . 26 Consolidated Statement of income protection of assets. Quahfied personnel are selected and an organization structure 27 Consolidated Statement of Cash Flows is maintained that provides for appropriate functional responsibility. Written policies and procedures have been developed and are revised as neces-28 Consohdated 5+atement of Retained Earnings and selected sary. The Company maintains and supports an extensive program of internal audits Quarterly information with appropriate management follow up. 29 Notes to ConsoSdated Finanual The Board of Directors, through its Auditing Committee comprised of outside direc- . statements tors, is responsible for ensuring that both management and the independent accoun-45 selected Consolidated Financial tants fulfill their respective respons.bilities relative to the financial statements. Information Moreover, the independent accountants have full and free access to meet with the 46 Electric Operating statistics Auditing Committee, with or without management present, to discuss auditing or 47 Gas Operating statistKs financial reporting matters. Report o -IndependentAccountants February 5,1998 h & %dm W w M.uw sm:ei SL 1/m MO 6M01 Telcpme 310204 85(11 To the Stockholders and Board of Directors of Ameren Corporation in our opinion, based upon our audits and the reports of other auditors, the accom-panying consolidated babnce sheet and the rei,:sted consolidated statements of income, of cash flows and retained earnings appearing on pages 24-28 of this report present fairly, in all material respects, the financial position of Ameren Corporation and ris subsidiaries at December 31,1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period anded December 31, 1997, in conformity with generally accepted accounting principles These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Centrai lllinois Public Service Company and CIPSCO investment Company, wholly-owned subsidiaries, which combined statements reflect . total assets of $1.889,451,000 and $1,913,691,000 at December 31,1997 and 1996, respectively, and total revenues of $863,441,000, $891,631,000 and 5837,216,000 for the three years in the period ended December 31,1997, respectively. Those state-ments were audited by other auditors whose reports thereon have been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for Central Illinois Public Service Company and CIPSCO investment Company, is based solely on the reports of the other auditors. We conducted our audits of these state-ments in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the finan-cial statements are fv.e of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial state-ments, assessing the accounting principles used and significant estimates made by r'anagement, and evaluating the overall financial staiement presentation. We bekve that our audits and the reports oi other auditors provide a reasonable basis for the opinion e7 pressed above. Sm N M VW b= n
Managemenn Discussion AndAnalysis OVERVIEW Ameren Corporation (Ameren) is a newly created holding company which is registered under the Public Utility Holding Company Act of 1935 (PUHCA). In December 1997, Union Electric Company (ArnerenUE) and CIPSCO Incorporated (CIPSCO) combined to forrn Ameren, with AmerenUE and . CIPSCO's subsidiaries, Central Illinois Public Service Company (AmerenCIPS) and CIPSCO Investment I Company (CIC) becoming wholly-owned subsidiaries of Ameren (the Merger). In addition, Ameren, as a result of the Merger, has a 60% ownership interest in Electric Energy, Inc. (EEI), which is consoli- , dated for financial reporting purposes. { The Merger was accounted for as a puoling of interests; therefore the consobdated financial state- i ments are presented as if the Merger were consurnmated as of the beginning of the earbest period .) presented. However, the conschdated financial statements are not necessarily indicative of the resul;s of operations, financial position or cash flows that would have occurred had the Merger been con-summated for the periods for which it is given efMt, nor is it necessarily indicative of the future results of operations, financial position or cash flows. -l References to the Company are to Ameren on a consolidated basis; however, in certain circum- . stances, the sumidiaries are separately referred to in order to destinguish between their.different business activities. RESULTS OF Earnings. Earnings for 1997,1996 and 1995, were $335 milhon ($2.44 per share), $372 million ($2.71 OPERATIONS per share) and $373 mdlion ($2.72 per share), respectively. Earnings and eamings per share fluctuated due to many conditions, primarily: weather variations, electric rate reductions, competitive market forces, credits to electnc custemers, sales growth, fluctuating operating costs, induding Callaway Plant nudear refueling outages, merger-related expenses, changes in interest expense, changes in income and property taios and an extraordinary charge. The Company recorded an extraordinary charge to eamings in the fourth quarter of 1997 fx the write <ff of generation-related regulatory assets and liabihties of the Company's liknois retail electric business as a result of electric industry restructuring legislation enacted in Illinois in December 1997. The write-off reduced eamings $52 mdlion, net of income taxes, or 38 cents per share. (See Note 2 - Regulatory Matters under Notes to Consolidated Financial Statements for further information.) Electric Operations. The impacts of the more significant items affecting electric revenues and c$ erat-ing apenses during the past three years are analyzed and discussed below: Variations from Prior Year Electric Revenues plonsof Doliw 1997 1996 1995 Rate vanaticns $- $(20) $(14) Credit to customers 28 (15) (33) Effect of abnorrnd weather 3 (28) 63 Growth and other 5 67 51 Interchange sales (43) 51 (13) eel 9_ (2) _.,_.176)
$2 5 53 ,5(22)
Electric revenues for 1997 were flat compared to IW6, reflecting a decrease in the Missouri electric cus- . tomer credrts recorded in 1997 versus 1996 (see Note 2 - Regulatory Ma+ters under Notes to Consohdated Financial Statements for further information), partly offset by a 1% decrease in kilowatthour sales. The kilo-watthour sales decrease was due to a 13% decrease in interchange sales due to market conditons and dif-ferences in the dassification of certain interchange ana putchased power transactions resulting from the Federal Energy Regulatory Commission (FERC) Order 883 and a 1% dedine in residential sales. These decreases were partly offset by increases in commercial and industrial sales of 1 % and 2%, respect vely, attnbutable to economic growth. In addition, sales at eel were up 6% om 1996. The increase in 1996 electric revenues was pnmarily due to a 5% incream in knowatthour sales over the pnor year, partly offset by the 1.8% rate decrease for Missouri electne customers and the net increase in Missouri ekxtnc custcmer credits recorded in 1996 versus 1995. (See Note 2 - Regu!atory Matters under Notes to ConsoMated Financial Statements for further information.) The kilowatthour sales increase reflected economic growth in the service area and increased interchange sales opportunities, partially offset by milder j weather dunng the penod. Residential and industnal sales each rose 2% over 1995, while commercial sales grew 3% and interchange sales increased 32%. The decrease in 1995 electric revenues was primanly the result of decreased sales to the Departrnent of Energy by eel, a one-time $30 million credit to Missoun electric customers ar.d rate decrease in ; Mrssouri. (See Note 2 - Regulatory Matters under Notes to Conso!! dated Financial Statements for further .j
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1 I I in 8ormation.) This decrease was partia!!y offset by increased retail kilowa'thour sales, mainly due to the unusually hot weather in the third quarter of 1995, compared to 1994, and sales growth reflecting the , Crmpany's healthy service area economy. Weather-sensitive residential and commercial sa'es increased 0% and 3%, respectively, over 1994, and industrial sak s grew 2%. Vanadens from_PrjoLYear Fuel and Purched Power monsof oore 1997 _ 1 9_6 _ 1995 I Vanation in generation $ 25 $43 $(10) Price (24) (14) 2 Generation efficiencies and other (5) 2 3 Purchased power variaion (50) ? 9 EEt 10 23 _ _ (42)
$(44) $56 $(38)
The decreaw in 1997 fuel and purchased power costs was pr!marily due to reduced perchased power costs, resulting from relatively flat native load sale <, lower interchange sales and lower fuel prices, offse: 6;y greater generation.The increase a '996 fuel and purchased power costs was driven mainly by iiigher kilowatthour sales, partia!!y offtet by lower fuel prkes due te the use of lower cost 1 coal ihe decrease in 1995 fuel and purchased power costs reflected decreased sales by eel, partly off- ! set by greater retail kilowatthour sales during the hot 1995 summer and the need for replacement ! power dunng Calaway Plant's spnng nucle" refuehng outage. l Gas Operations. Gas resenues in 1997 decreased $4 million pnmanly due to a 12% decrease in retail dekatherm sales. Weather-sensitive residential and commeraal sales dechned 15% and 18%, respectively l These decreases were partly offset by a 20% increase in industriel sales and an increase in off-system l sales of gas to others. The increase in 1996 gas revenues of $37 million was primar;Iy the result of higher I gas prices and increased sales due to colder weather. Residential and cornmeraal dekatherm sales inaeased 13% and 17%, respectively, in 1996 versus 1995. Gas revenues decreased 10 railhon in 1995 pnmanly as a result of lower prices and lower industrial dekathenr. sales. Gas costs for i997 remained flat as cnmpared to those of 1996. The $35 milhon increase in 1996 gas costs was primanly the res...h of a combinat)on of increased demand due to colder weather and an
'ncrease in the pnce paid fo: gas ia 1996 versus 1995. The decrease in 1995 gas costs of $20 milhon l w.as predominantly due to lower gas pnces in 1995, compared to 1994 l Other Operating Expenses. Other operating expense variations in 1995 thrc qh 1997 reflected recurnng factors such as growth, infl3 tion, labor and benefit increases. In 1997, other operations expenses increased $41 m;l%n primarily due to increases in information system-related costs, labor l and injuries and damages espenses. In 1996, other operations expenses increased $2 mill;on priman-ly due to inueases in employee benefits, injuries and damages and information system-related costs, i offset by decreases resulting from several nonrecurnng costs incurred in 1995. Other operations I expenses increased $7 milkon in 1995, mainly due to increases in labor and material and supphes f expenses, as well aa the occurrence of several nonrecurnng costs, including costs related to a volun-tary separation program and write-offs of system development costs. These increases were partly off-set by decreases in employee benefits, injuries and damages and insurance expenses.
Maintenance expenses for 1997 increased $8 milhon primarily resulting from increased scheduled fos-sil plant maintenance, partly offset by decreased expenses at Callaway Plent due to the absence of a refuei.rq outage in 1997. In 1996, maintenance expenses decreased $5 million pnmarily due to lower scheduled power plant maintenance, partly offset by increased labor expenses at Callaway Plant. In
- 1995, mainteaice expenses increased $26 milhon mainly due to scheduled power plant maintenance expenses, partially offset by reduced distnbution system maintenance expenses. Callaway Plant's main-tenance expenses inoeased $17 milhon primanly due to the spring 1995 refuehng outage. Maintenance expenses at other power plants increamd primarily due to scheduled maintenance outages. i Dep'eaation and amortization emense increased $7 million in 1997, $12 milhon in 1996 and $11 l million m 1995, due to increased deprecable property. l Taxes. income tax expense from operations decreesed $19 mison in 1997 pnncipally due to lower '
pretax income and a Ic.wer effective tax rate. Incene tax enense from operations decreased $8 milhon in 1996 principally due to lower pretax income. Income tax egense from operations decraased $2 mil-hon in 1995 primarily due to lower pretax income, partially offset by a higher effective income tax rate. I 19 1
Oth:r incoma and Deductions. Miscellaneous, net increased $11 mil lion for 1997, compared to 1996, primarily due to the capitalization of merger-related expenses. (See Note 2 - Regulatory Matters under ' Notes to Consolidated Financial Statements for further information.) Miscellaneous, net inueased $2 mil- ' lion for 1996 primarily due to reduced merger-related expenses. Miscellaneous, net decreased $11 mik lion for 1995 primarily due to increased merger-related expenses. Interest. Interest expense increased $5 million in 1997 primarily due to higher debt outstanding during the year at higher interest rates. Interest expense increased $2 milhon for 1996 primanly due to a greater amount of short-term debt outstanding, offset by lower rates on variable-rate long-term debt. In 1995, interest expense dedined $5 million as decreases in other interest expense were partly offset by higher interest rates on variable long-term debt. Balance Sheet. The $26 million decrease in other current liabilities was primarily due to a tower accrued customer crediti(See Note 2 - Regulatory Matters under Notes to Consohdated Financial Statements for further information.) The $50 m!! lion increase in other deferred credits and liabilities was attributable to increases in the accrued pension liabihty and the nuclear decommissioning trust fund. LIQUIDITY AND Cash provided by operating activities totaled $687 million for 1997, compared to $786 million and $792 CAPITAL million in 1996 and 1995, respectively. RESOURCES Cash flows used in investing activities totaled $387 million, $481 million and $468 million, for the year:, ended December 31,1997,1996 and 1995, respectively. Expenditures in 1997 for constructing , new or to improve existing facilities, purchasing rail cars and complying with the Clean Air Act were
$381 million. In addition, the Company spent $35 million to acquire nuclear fuel.
Construction opend tures are expected to be about $315 million in 1998. For the five-year period 1998-2002, construction expenditures are estimated at $1.7 bilkon. This estimate does not include any construction expenditures which may be incurred by the Company to meet new air quality standards for ozone and particulate matter, as discussed below. The Company's need for additional base load electric generating capacity is not anticipated until after the year 2013. Under Title IV of the Clean Air Act Amendments of 1990, the Company is required to significantly reduce total annual sulfur dioxide emissions by the year 2000. Significant reductions in nitrogen oxide are also required. By switching to low-sulfur coal and early banking of emissions credits, the Company anticipates that it can comply with the requirements of the law without significant rev-enue increases because the related capital costs are largely offset by lower fuel costs. As of year-end 1997, est! mated remaining cap!tal costs expected to be incurred pertaining to Clean Air Act-related projects totaled $107 inillion. In July 1997, the United States Environmental Protection Agency (EPA) issued final regulations revis-ing the National Ambient Air Quality Standards for ozone and particulate matter. Although specific emission control requirements are still being developed, it is believed that the revised standards will require significant additional reductions in nitrogen oxide and sulfur dioxide emissions from coal-fired boilers. In October 1997, the EPA announced that Missouri and Illinois are included in the area targeted for nitrogen oxide emissions reductions as part of the EPA's regional control program. Reduction requirements in nitrogen oxide emissions from the Company's coal-fired boilers could exceed 80% from 1990 levels by the year 2002. Reduction requirements in sulfur dioxide emissions may be up to 50% beyond that already required by Phase il acid rain control prcvisions of the 1990 Clean Air Act Amendments and could be required by 2007. Because of the magnitude of these additional reductions, the Company could be required to incur significantly higher capital costs to meet future compliance obligations for its coal-fired boilers or purchase power from other sources, either of which could have . significantly higher operations and maintenance expenditures associated with compliance. At this time, the Company is unable to determine the impact of the revised air quality standards on its future finan-cial condition, results of operations or liquidity. In December 1997, the United States and numerous other countries agreed to certain environmental provisions (the Kyoto Protocol), which would require decreases in greenhouse gases in an effort to address the " global warming" issue. The Company is unable to predict what requirements, if any, will be adopted in this country. However, implementation of the Kyoto Protocol in its present form would likely result in significantly higher capital costs and operations and maintenance expenditures by the Company. At this time, the Company is unable to determine the impact of these proposals on its future financial condition, results of operations or liquidrty. See Note 11 - Ca!!away Nudear Plant under Notes to Conschdated financial Statements for a dis-cussion of Callaway Plant decommissioning costs. Cash flows used in financing activities were $302 million for 1997, compared to $296 milhon and
$325 million for 1996 and 1995, respectively. The Company's principal financing activities during 1997 included the issuance of $187 million of long-term debt, offset by the redemption of $123 million of long-term debt and $64 million of preferred stock and the payment of dividends.
The Company plans to continue utilizing short-term debt to sup;x>rt normal operations and other tem- {, 20
porary requirements. The Company's utility operating subsidiaries are authorized by the FERC to have up to an aggregate $750 million of short-term unsecured debt instruments outstanding at any one time. Short-term borrowings consist of bank loans (maturities generally on an overnight basis) and commercial paper (matunties generally within 10 to 45 days). At December 31,1997, the Company had committed bank lines of credit aggregating $259 million (of which $244 million were unused and $179 mil! ion were available at such date) which make available interim financing at various rates of interest based on UBOR, the bank certificate of deposit rate or other options. The lines of credit are renewable annually at various dates throughout the year. At year-end, the Company had $86 million of short-term borrowings. AmerenUE also has bank credit agreements due 1999 which permit the borrowing of up to $300 million and $200 million on a long-term basis. At December 31,1997, $35 million of such borrowings were outstanding. Additionally, AmerenUE has a lease agreement which provides for the financing of nuclear fuel. At December 31,1997, the maximum arrount that could be financed under the agreement was $120 mil-tion. Cash provided from financing for 1997 included issuances under the lease for nuclear fuel of $40 million, offset in part by $28 million of redemptions. At December 31,1997, $117 million was financed under the lease. (See Note 3 - Nuclear Fuel Lease under Notes to Consolidated Financial Statements for further information.) RATE MATTERS See Note 2 - Regulatory Matters under Notes to Consolidated Financial Statements for a discussion of rate matters. CONTINGENOES See Note 10 - Commitments and Contingencies under Notes to Consolidated Financial Statements for material issues existing at December 31,1997. DMDENDS Cornmon stock dividends paid in 1997 resulted in a payout rate of 99% of the Company's earnings to common stockholders (86% of earnings before extraordinary charge). Dividends paid to common stock-holders in relation to net cash provided by operating activities for the same period were 48E The Board of Directors does not set specific targets or payout parameters for dividend payments; however, the Board considers various issues including the Company's historic earnings and cash flow; projected earnings, cash flow and potential cash flow requirements; dividend payout rates at other utili-ties; return on investments with similar risk characteristics; and overall business considerations. On February 13,1998, the Ameren Board of Directors dedared a quarterly common stock dividend of 63.5 cents per share, payable March 31,1998. ELECTRIC Changes enacted and being considered at the federal and state levels continue to change the structure INDUSTRY of the electric industry and utility regulation, as well as encourage increased competition. At the federal RESTRUCTURING level, the Energy Policy Act of 1992 reduced various restrictions on the operation and ownership of inde-pendent power producers and gave the FERC the authority to cider electric utikties to provide transmis-sion access to third parties, in April 1996, the FERC issued Order 888 and Order 889, which are intended to promote compe-tition in the wholesale electric market. The FERC requires transmission-owning pubhc utikties, such as AmerenUE and AmerenCIPS, to provide transmission access and service to others in a manner similar and comparable to that which the utihties have by virtue of ownership. Order 888 requires that a sin-gle tariff be used by the utility in providing transmission service. Order 888 also provides for the recovery of stranded costs, under certain conditions, related to the wholesale business. Order 889 established the standards of conduct and information requirements that transmission owners must adhere to in doing business under the open access rule. Under Order 889, utilities must obtain transmission service for their own use in the same manner their customers will obtain service, thus mitigating market power through control of transmission facilities. In addition, under Order 889, utilities must separate their merchant function (buying and selhng wholesale power) from their trans-mission and reliability functions. The Company beheves that Order 888 and Order 889, which relate to its wholesale business, will not have a material adverse effect on its financial condition, results of operations or liquidity. In addition, certain states are considering proposals or have adopted legislation that will promote competition at the retail level. In December 1997, the Governor of liknois signed the Electric Service Customer Choice and Rate Relief Law of 1997 (the Act) providing for electric utility restructuring in liknois. This legislation introrfuces competition into the supply of electric energy in Illinois. (See Note 2-Regulatory Matters under Notes to Conschdated Financial Statements for further information.) After evaluating the impact of this legislation, the Company determined that it was necessary to wnte-off the generation-related regulatory assets and habilities of its liknois retail electric business. This extraordinary charge reduced 1997 eamings $52 million, net of income taxes, or 38 cents per - share. The Company has also concluded that its remaining net generation-related assets are not impaired and that no plant write-downs are necessary at this time. The provisions of the Act could v kunnat a
also result in lower revenues, reduced profit margins and increased costs of capital. At this time, the Company is unable to determine any further impact of the Act on its future financial condition, results of operations or liquidity. (See Note 2 - Regulatory Matters under Notes to Consolidated financal Statements for further information.) In Missouri, where approximately 72% of the Company's retail electric revenues are derived, a task force appointed by the Missouri Public Service Commission (mop 5C) is investigating electric industry restructuring and competition and is expected to issue a report to the MoPSC in 1998. A joint legisla-tive committee is also conducting hearings on these issues. Up to this point, retail wheeling has not been allowed in Missouri; however, the joint agreement approved by the mop 5C in February 1997 as - part of its merger authorization includes a provision that required AmerenUE to file a proposal for a 100-megawatt experimental retail wheeling pilot program in Missouri. AmerenUE filed its proposal with the MoPSC in September 1997. This proposal is subject to review and approval by the MoPSC. The Company is unable to predict the timing or ultimate outcome of electnc industry restructuring in the state of Missouri, as well as its impact on the Company's future financial condition, results of opera-tions or liquidity. The potential negative consequences of electric industry restructuring could be signifi-cant and include the impairment and write down of certain assets, including generation-related plant and net regulatory assets, lower revenues, reduced profit margins and increased costs of capital. (See ' Note 2 - Regulatory Matters under Notes to Consolidated Financial Statements for further information.) INFORMATION The Year 2000 issue relates to computer systems and applications that currently use two-digit date SYSTEMS fields to designate a year. As the century date change occurs, date-sensitive systems will recognize the year 2000 as 1900, or not at all. This inability to recognize or properly treat the year 2000 may cause systems to process critical financial and operational information incorrectly. The Company is utilizing both intemal and external resources to identify, correct or reprogram and test information systems for Year 2000 compliance. The Company estimates that its costs for addressing the Year 2000 issue will range from $10 million to $15 million. Tnese costs will be expensed as incurred. OUTLOOK Significant changes are taking place in the electric utility industry. The Company's management and Board of Directors recognize that competition will likely continue to increase in the future, especially in the energy supply portion of the business. New air quality standards are being considered which could significantly increase capital costs, purchased power expenses and other operations and main-tenance expenditures. In addition, expenditures for information systems are increasing (including those costs associated with the Year 2000 issue). These issues will result in numerous challenges and uncertainties for Ameren and the utility industry, including the potential for increased earnings pres-sure on Ameren and other electric utilities. Due to the factors cited above, as well as expected future rate decreases in the Company's Illinois and Missouri jurisdictions (see Note 2 - Regulatory Matters under Notes to Consohdated financial Statements for further information) and other operating con-ditions (such as the refueling of Callaway Nuclear Plant), management believes that 1998 earnings will likely be lower than 1997 earnings, excluding the extraordinary charge for the wate-off of the generation-related regulatory assets and liabilities associated with the Company's lilinois retail electric business. In addition, the factors cited previously may also contribute to earnings pressure beyond 1998. At this time, management cannot predict the ultimate timing or impact of these matters on its future financial condition, results of operations or liquidity. Ameren management and its Board of Directors are taking actions to address these challenges. Efforts are underway to accelerate merger cost savings and other expense reductions. The Company , is also analyzing the potential benefits associated with the Illinois electric industry restructuring legis-lation, including the elimination of the fuel adjustment clause and the securitization of certain future revenues. In addition, the Company will continue to focus on developing its core energy business for additional growth opportunities, as evidenced by the recent formation of a power marketing and energy services affiliate, Ameren Energy, Inc. Through these initiatives and other strategies, the Company intends to address these challenges, maximize the value of its strategic generating assets and enhance shareholder value. ACCOUNTING in June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting MATTERS Standards (SFAS) No.130, " Reporting Comprehensive income" and SFA5 No.131, " Disclosures about Segments of an Enterprise and Related Information." 5FAS 130 establishes standards for report-ing and displaying comprehensive income. 5FAS 131 establishes standards for reporting information about operating segments in annual financial statements and interim reports to shareholders. 5FAS 130 and SFA5131 are effective for fiscal years beginning after December 15,1997. SFA5130 and SFA5131 are not expected to have a material effect on the Companys financial position or results of operations upon adoption. 22
EFFECTS OF The Company's rates for retail electric and gas service are regulated by the MoPSC and the Illinois IELATION AND Commerce Commission. Non-retail electnc rates are regulated by the FERC. CHANGING PRICES The current replacement cost of the Company's utshty plant substantially exceeds its recorded histon-cal cost. Under existing regulatory practice, only the histoncal cost of plant la recoverable from cus-tomers. As a result, cash flovvs designed to provide recovery of histoncal costs through depreciation may not be adequate to replace plant in future years. However, existing regulatory practice may be modified for the Company's generation portion of its business (see Note 2 - Regulatory Matters under Notes to Consohdated Financial Statements for further information). In addition, the impact on com-mon stockholders is mitigated to the extent depreciable property is financed with debt tha';is repaid with dollars of less purchasing power. In Ilknois, changes in the cost of fuel for electric generation and gas costs are generally reflected in bilkngs to customers through fuel and purchased gas adjustment clauset However, existing regulatory practice may be modified in the Illinois retail jurisdiction for changes in the cost of fuel for electnc gen-eration (see Note 2 - Regulatory Matters under Notes to Consokdated Financia! Statements for further information). In the Missouri retail jurisdiction, the cost of fuel for electric generation is reflected in base rates with no provision for changes to be made through a fuel adjustment clause. Changes in gas costs , in the Missouri retail jurisdiction are generally reflected in bilkngs to customers through a parchased gas j adjustment clause. ! Inflation continues to be a factor affecting operations, earnings, stockholders' equity and financial l l performance. SAFE HARBOR Statements made in this annual report to stockholders which are not based on historical facts, are STATEMENT forward-looking and, accordingly, involve nsks and uncertainties that could cause actual results to differ matenally from those discussed. Although such forward-looking statements have been made in good f aith and are based on reasonable assumptions, there is no assurance that the expected results will be achieved These statements indude (without hmitation) statements as to future expectations, behefs, plans, strategies, objectives, events, conditions and financial performance. In connection with the " Safe Harbor" provisions of the Pnvate Securities Litigation Reform Act of 1995, the Company is providing this cautionary statement to identify important factors that could cause actual results to differ matenally from those anticipated. Factors include, but are not kmited to, the effects of regulatory actions; changes in laws and other governmental actions; competition; future market pnces for electrioty; average rates for electriaty in the Midwest; business and economic cond:tions, weather conditions; fuel pnces and availabikty; generation plant performance; monetary and fiscal pohcies; and legal and administrative proceedings. e 23
ConsolidatedBalance Sheet Assets mnwe,of Dortes) onente 31, 1997 1996 Property and Plant, at original cost: Electric $11,522,730 $11,252,095 Gas 447,458 428,531 Other 36,023 35,965 12,006,211 11,716,591 Less accumulated depreciation and amortization 5,285,434 5,024,046 6,720,777 6,692,545 Construction work in progress: Nuclear fuelin process 134,804 96,147 . Other 131,504 - 162,414 Total property and plant, net 6,987,085 6,951,106 investments and Other Assets: . Investments 97,188 113,310 Nuclear decommissioning trust fund 122,438 96,601 Other 64,915 64,655 Total investments and other assets 284,541 274,566 Current Assets: Cash and cash equivalents 9,696 11,899 Accounts receivable - trade (less allowance for doubtful accounts of $4,845 and $5,795, respectively) 266,306 268,839 Unbilled revenue 102,864 106,316 Other accounts and notes receivable 49,765 55,256 Materials and supplies, at average cost - Fossil fuel 93,431 106,153 Other 134,152 137,953 Other 55,002 42,759 Total current assets 711,216 729,175 Egulatory Assets: Deferred income taxes 639,792 734,206 Other 204,913 243,514 Total regulatory assets 844,705 977,720 TOTAL Assets 58,827,547 $8,932,567 see Notet to ConvAdated Financal statements. 24 .
ConsolidatedBalance Sheet Capital and Liabilities frhouwdof Dolls 4 Decemte 31, 1997 1996 Capitalization: Common stock, $.01 par value, authonzed 400,000,000 shares - outstanding 137,215,462 shares 5 1,372 $ 1,372 Other paid-in capital, principally premium on common stock 1,582,938 1,583,728 Retained earnings hee accompanyng statemenu 1,434,658 1,431,295 Total common stockholders' equity 3,018,968 3,016,395 Preferred stock not subject to mandatory redemption (Note 4) 235,197 298,497 Preferred stock subject to mandatory redemption (Note 4) - 624 Long-term debt (Note 6) 2,506,068 2,335,454 Total capitalization 5,760,233 5,650,970 e 3,534 3,534 Minority interest in Consolidated Subsidiary Current Liabilities: Current maturity of long term debt 52,241 146,410 86,266 69,068 Short-term debt Accounts and wages payable 293,391 297,017 Accumulated deferred income taxes 35,809 43,933 Taxes accrued 110,566 65,245 Other 168,727 194,239 Total current liabilities 747,000 815,912 Construction, Commitments and Contingencies (Notes 10 and 11) Accumulated Deferred income Taxes 1,556,981 1,653,095 Accumulated Deferred Investment Tax Credits 190,260 209,227 Regulatory Liability 224,225 304,172 Other Deferred Credits and Liabihties 345,314 295,657 TOTAL CAMAL AND LJABILrnEs $8,827,547 58,932,567 see Notes to Consolidated Finanaal Statements e i Msurus A 25
ConsolidatedStatement OfIncome _ __ s e - ._ ws ended December 31, 1997 1996 1995 Operating Revenues: Electric $3,064,177 $3,061,856 $3,008,481 Gas ' 249,815 254,412 -217,420 Other 12,551 12,153 9,976-Total operating revenues 3,326,543 3,328,421' 3,235,877 Operating Expenses: Operations Fuel and purchased power 836,445 880,204 823,951 Gas 160,679 160,776 125.305 Other 585,214 543,998 542,386 . 1,582,338 1,584,978 - 1,491,642 Maintenance 310,241 302,203 307,546 Depreciation and amortizstion 346,000 339,276 327,201 . Income taxes 234,179 253,005 260,940 Other taxes 271,711 273,034 270,670 Toial operating expenses 2,744,469 2,752,496 2,657,999 Operating income 582,074 575,925 577,878 Oth:r income and (Deductions): Allowance for equity funds used during construction 5,244 6,870 7,716 _ Miscellaneous, net (10,344) (21,229) (22,975) Total other income and (deductions) (5,100) (14,359) (15,259) Income Before Interest Charges and Preferred Dividends 576,974 561,566 562,619 Interest Charges and Preferred Dividends: Interest 185,368 180,402 178,826 Allowance for borrowed funds used dunng construction (7,462) (7,490) (6,179) Preferred dividends of subsidiaries 12,532 16,970 17,100 Net interest charges and preferred dividends 190,438 189.882 189,747 income Before Extraordinary Charge 386,536 371,684 372,872 Extraordinary Charge, net of income taxes (Note 2) (51,820) - - NET INCOME $ 334,716 $ 371,684 $ 372.872 Eirnings per Common Share - Basic and Diluted (based on average shares outstanding) income before extraordinary charge $2.82 $2.71 $2.72 Extraordinary charge (.38) - - Net income 52.44 $2 71 $2.72 AvtRAGE COMMON SHARES OUTSTANDING 137,215,462 137,215,462 137,215,462 see 9mes to conuwied Fnwicial statements-26
ConsolidatedStatement O Cash Flows (Thousandsof ooitars) Year ended December 31, 1997 1996 1995 Cash Flows From Operating: Irtone before extraordinary charge $386,536 $371,684 $372,872 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 340,079 333,565 322,813 Amortization of nuclear fuel 37,126 37,792 35,140 Allowance for funds used during construction (12,706) (14,360) (13,895) Postretirement benefit accrual
- - 11,923 Deferred income taxes, net (24,499) 12,665 4,003 Deferred investment tax credits, net (18,967) (9,531) (9,542)
Changes in assets and liabilities: Receivables, net 11,476 (25,468) (21,229) Materials and supplies 16,523 2,376 (174) Accounts and wages payable (3,626) 7,302 105,042 Taxes accrued 45,321 6,259 (7,085) (89,862) 63,816 (8,212) Other 5et cash provided by operating activities 687,401 786,100 791,656 Cash Flows From investing: Construction expenditures (380,593) (435,904) (429,839) Allowance for funds used during construction 12,706 14,360 13,895 Nuclear fuel expenditures (35,432) (51,176) (42,444) 16,122 (7,784) (10,047) Other
' Net cash used in investing activities (387,197) (480,504) (468,435)
Cash Flows From Financing: (331,282) (326,855) (319,875) Dividends on common stock Environmental bond funds
- - 4,443 Redemptions -
Nuclear fuellease (28,292) (34,819) (70,420)
- (18,300) (6,100)
Short-term debt Long-term debt (123,444) (35,000) (54,000) Preferred stock (63,924) (26) (26) Issuances - Nuclear fuellease 40,337 43,884 49,134 Short term debt 17,198 9,847 52,536
- Long-term debt 187,000 65,194 19,766 Net cash used in financing activities (302,407) (296,075) (324,542)
- Net change in cash and cash equivalents (2,203) 9,521 (1,321) 11,899 2,378 3,699 Cash and cash ectuivalents at beginning of year CA%H AND CA%H EQUTVAlf tfr5 AT END or YFAR
% 9,696 $ 11,899 5 2,378 Cash paid during_the periods:
Interest (net of amount capitalized) 5162,459 $167,433 $173,569 l
$242,222 $248,096 $274,820 Income taxes f SUPPLEMENTAL DtsClosVRE of NoNCAsH TRANSACTION An extraordmary charge to earrungs was recorded in the fourth quarter of 1997 for the wnte-off of generation-related regulatory assets and habihties of the Companyt minois retad electnc business as a result of electnc industry restructunng leg' station enacted in llhnois in December 1997. The wnte-off reduced earnings $s2 mdhon, net of income taxes. (see Note 2 - Regulatory Matters for further information.)
see Notes to Conschdated Finanaal statements M 27 j
ConsolidatedStatement O RetainedEarnings munands of Donars) Yw ended Decembe 31, 1997 1996 1995 Balince at Beginning of Period $1,431,295 $1,385,629 $1,331,567 Add: Net income 334,716 371,684 372,872 Other - 837 1,065 334,716 372,521 373,937
" Deduct:
Common stock cash dividends 331,282 326,855 319,875 Other 71 - - 331,353 326 855 319,875 8ALANCE AT CloSE of Ptnion 51,434,658 51,431,295 $1,385,629 Selected QuarterlyIn ormation (Unaudited) (Thou', ands of Dollars, f acept per Share Amounts) QuIrter Ended Operatir@ Operating Net income Earnings (Loss) Revenues income (Loss) per Common Share Mrrch 31,1997 (a) 5 759,663 5 95,461 $ 44,977 5 .33 March 31,1996 (a) 777,333 106,393 57,946 _ ,42 Juna 30,1997 (b) 791,821 132,492 79,686 .58 June 30,1996 (b) 785,297 123,668 72,616 .53 Sept:mber 30,1997 1,043,137 269,093 215,423 1.57 September 30,1996 1,018,214 267,812 217,073 1.58 Dec:mber 31,1997 (c) 731,922 85,028 (5,370) (.04) December 31,1996 (c) 747,577 78,052 24,049 .18 (a) The first quarter of 1997 and 1996 included credits to Missouri electnc customers which reduced net income approximately $7 milhon, or 5 cents per share, and $8 million, or 6 cents per share, respectively in addition, a 1.8% rate decrease effAive August 1995 for Missoun electric customers reduced net income for the first cuarter of 1996 $4 million, or 3 cents per share * (b) The second quarter of 1997 and 19% included credits to Missouri electnc customers which reduced net income approximately $4 million. or 3 cents per share, and
$18 mdhon, or 14 cents per share, respectively in addmon, the 1995 rate decrease reduced net income for the second quarter of 1996 $5 milhon, or 4 cents per share.
(c) The fourth quarter of 1997 included a net reversal of merger-related expenses of $17 milhon, or 13 cents per share. The fourth quarter of 1997 a!so encluded an extraordinary charge of $52 mdhon net of income taxes, or 38 cents per share bee Note 2 - Regulatory Matters for further information). Callaway Plant refuehng experses, which decreased net income approximately $18 milhon, or 13 cents per share, were included in the fourth quarter of 1996 other changes in quarterty eamings are due to the effect of weather on sales and other factors that are charactenstic of pubhc utihty operations. see Notes to Consohdated Finanoal Statements. 28
Notes To ConsolidatedFinancialStatements NOTE 1 - Merger and Basis of Presentation. Effective December 31,1997, following the receipt of all required Summary of state and federal regulatory approvals, Union Electric Company (AmerenUE) and CIP5CO Incorporated Significant (CIPSCO) combined to form Ameren Corporation (Ameren)(the Merger). The accompanying consolidated Accounting financial statements (the financial statements) reflect the accounting for the Merger as a pooling of Policies interests and are presented as if the companies were combined as of the earliest period presented. However, the financial information is not necessarily indicative of the results of operations, financial position or cash flows that would have occurred had the Merger been consummated for the periods for which it is given effect, nor is it necessarily indicative of future results of operations, financial position or cash flows. The outstanding preferred stock of AmerenUE and Central Illinois Public Service Company (AmerenCIPS), a subsidiary of CIPSCO, was not affected by the Merger. The accompanying financial statements include the accounts of Ameren and its consolidated sub-sidiaries (collectively the Company). All subsidiaries for which the Company owns directly or indirectly more than 50% of the voting stock are indoded as consolidated subsidiaries. Amerent primary operating com- , panies, AmerenUE and AmerenCIPS, are engaged principally in the generation, transmission, distribution and sale of electric energy and the purchase, distnbotion, transportation and sale of natural gas in the states of Missouri and Illinois. The Company also has a non-regulated investing subsidiary, CIPSCO investment Company (CIC). Additionally, the Company has a 60% interest in Electric Energy, Inc. (EEI). eel
- owns and operates an electric generating and transmission facility in Illinois that supplies electric power pri-marily to a uranium enrichment plant located in Paducah, Kentucky.
All significant intercompany balances and transactions have been eliminated from the consolidated financial statements. Operating revenues and net income for each of the years in the three year period ended December 31, 1997, were as follows (in millions): Year ended December 31,1997: AmerenUE CIPSCO Other Ameren Operating revenues 52,287 5863 5177 $3,327 Extraordinary charge (27) (25) - (52) Net income 293 42 - 335 Year ended December 31,1996: Operating revenues $2,260 $891 $177 $3,328 Net income 292 80 - 372 Year ended December 31,1995: Operating revenues $2,242 $837 $157 $3,236 Net income 301 72 - 373 Regulation. Ameren is a registered holding company under the Public Utility Holding Company Act of 1935 (PUHCA) and is subject to regulation by the Securities and Exchange Commission (SEC). AmerenUE is also regulated by the Missouri Public Service Commission (MoPSC), Illinois Commerce Commission (ICC) and the Federal Energy Regulatory Commission (FERC). AmerenCIPS is also regulated by the ICC and the FERC. The accounting policies of the Company conform to generally accepted accounting principles (GAAP). (See Note 2 - Regulatory Matters for further information.) Property and Plant. The cost of additions to and t~terments of units of property and plant is capital-ized. Cost includes labor, material, applicable taxes ano overheads, plus an allowance for funds used during construction. Maintenance expenditures and the renewal of items not considered units of prop-erty are charged to income as incurred. When units of depreciable property are retired, the original cost i and removal cost, less salvage, are charged to accumulated depreciation. Depreciation. Depreciation is provided over the estimated lives of the various classes of depreciable property by applying composite rates on a straight-line basis. The provision for depreciation in 1997, 1996 and 1995 was approximately 3% of the average depreciable cost. ; Fuel and Gas Costs. In Illinois, changes in the cost of fuel for electric generation and gas costs are gen-erally reflected in billings to customers through fuel and purchased gas adjustment dauses. However, existing regulatory practice may be modified in the Illinois retail jurisdiction for changes in the cost of fuel for electric generation (see Note 2- Regulatory Matters for further information). In the Missouri retail juris-diction, the cost of fuel for electric generation is reflected in base rates with no provision for changes to be made through a fuel adjustment clause. Changes in gas costs in the Missouri retail jurisdiction are gen-erally reflected in billings to customers through a purchased gas adjustment clause. Nuclear Fuel. The cost of nuclear fuel is amortized to fuel expense on a unit-of-production basis. Spent fuel disposal cost is charged to expense based on kilowatthours sold. M 29
C:sh gnd C:sh Equivrients. Cash and cash equivalents include cash on hand and temporary invest-ments purchased with a maturity of three months or less. Income Taxes. The Company and its subsidiaries file a consolidated federal tax return. Deferred tax assets and habilities are recognized for the tax consequences of transactions that have been treated differ-ently for financial reporting and tax return purposes, measured using statutory tax rates. Investment tax credits ut.lized in prior years were deferred and are being amortized over the useful lives of the related properties. Allowance for Funds Used During Construction. Allowance for funds used during construction (AFC) is a utility industry accounting practice wher6y the cost of borrowed funds and the cost of equity funds (preferred and common stockholders' equity) applicable to the Companyt construction program are capi-talized as a cost of construction. AFC does not represent a current source of cash funds. This accounting practice offsets the effect on earnings of the cost of financing current construction, and treats such financing costs in the same manner as construction charges for labor and materials. Under eccepted rate-making practice, cash recovery of AFC, as well as other construct:on costs, occurs when completed projects are placed in service and reflected in customer rates. The AFC ranges of rates used during 1997,1996 and 1995 were 8 3% - 8.7%,7.7% - 9.0% and 9 0% - 9.3%, respectively. Unamortized Debt Discount, Premium and Expense. Discount, premium and upense associated with long-term debt are amortized over the lives of the related issues. Revenue. The Company accrues an estimate of electric and gas revenues for service rendered but unbilled at the end of each accounting period. , Stock Compensation Plans. The Company applies Accounting Principles Board Opinion No. 25,
" Accounting for Stock issued to Employaes" (APB 25) in accounting for its plans.
Long-Lived Assets. Statement of Finanaal Accounting Standards (SFAS) No.121, " Accounting for the impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" became effective on January 1,1996. SFAS 121 prescribes general standards for the recognition and measurement of impair-ment losses. SFA5121 requires that regulatory assets which are no longer probable of recovery through future revenues be charged to earnings (see Note 2 - Regulatory Matters for further information). Earnings per Share. SFA5 No.128, "Eamings per Share" became effective on January 1,1997. SFAS 128 established standards for computing and presenting eamings per share (EPS) on a basic and diluted basis (see Note 9 Stock Options for further information). SFAS 128 did not have an impact on the finan-cial position, results of operaticas or liquidity of the Company upon adoption. Use of Estimates, The preparation of financial statements in conformity with GAAP requires manage-ment to make certain estimates and assumptions. Such estimates and assumptions may affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the finan-Cial statements and the reported amounts of revenues and expenses during the reported penod. Actual results could differ from those estimates. Reclassifications. Certain redassifications have been made to prior-years finanaal statements to con-form with 1997 reporting. NOTE 2 - In July 1995, the MoPSC approved an agreement involving the Company's Missoun retail electnc rates. Regulatory The agreement decreased rates 1.8% for all classes of Missouri retail electric customers, effective Matters August 1,1995, reducing anneal revenues about $30 million and reduong annual earnings approximately 13 cents per share. In addition, a one-tirre $30 million credit to retail Missouri electric customers reduced 1995 earnings approximately 13 cents per share. Also included was a three-year expenmental attemative regulation olan that runs from July 1,1995 through June 30,1998, which provides that earnings in any , future years in excess of a 12.61% regulatory retum on equity (ROE) will be shared equally between cus-tomers and stockholders, and earnings above a 14% ROE will be credited to customers. The formula for computing the credit uses twelve-month results ending June 30, rather than calendar year earnings. The agreement also provides that no party shall file for a general increase or decrease in the Companys Missouri retail electric rates prior to July 1,1998, except that the Company may file for an increase if certain adverse events occur. During 1997, the Company recorded a $20 million credit for the second year of the plan, which reduced earnings $11 million, or 8 cents per share. During 1996, the Company recorded a $47 mil-lion credit, which reduced earnings $28 million, or 20 cents per share. These cred:ts were reflected as reduc-tions in electric revenues, included in the joint agreement approved by the MoPSC in its February 1997 order authorizing the Merger, is a new three-year experimental alternative regulation plan that will run from July 1,1998 through June 30, 2001. Like the current plan, the new plan requires that earnings over a 12.61 % ROE up to a 14% ROE will be shared equally between customers and stockholders. The new tnree-year plan will also return to customers 90% of all earnings above a 14% ROE up to a 16% ROE. Earnings above a 16% ROE would be credited entirely to customers. Other agreement provisions include: recovery within a 10-year period of the merger-related expenses apphcable to the Missouri retail jurisdiction; a M. souri electric rate decrease, effec-
)
tive September 1,1998, based on the weather-adjusted average annual credits to customers under the current expenmental attemative regulation plan; and an experimental retail wheeling pilot program for 100 l 30
megawatts of electric power. Also, as part of the agreement, the Company did not seek to recover in Missouri the merger premium. The exdusion of the merger premium from rates did not result in a charge to earnings. I in September 1997, the ICC approved the Merger subject to certain conditions. The conditions 5cluded the requirement for AmerenUE and AmerenCIPS to file electric and gas rate cases or alterna-trve regulatory plans within six months after the Merger became final to determine how net merger savings would be shared between the ratepayers and stockholders. In December 1997, the Governor of Ilknois signed the Electric Service Customer Choice and Rate Relief Law of 1997 (the Act) providing for electric utility restructuring in liknois. This legislation intro-duces competition into the supply of e!ectric energy in Illinois. The Act includes a 5% rate decrease for the Company's lilinois residential electric customers, effectrve August 1,1998. The Company may be subject to additional 5% residential electric rate decreases in each of 2000 and 2002 to the extent its rates exceed the Midwest utility average at that time. The Company's rates are currently below the Midwest utitty average. The Company estimates that the initial 5% rate decrease will result in a decrease in annual electric revenues of about 513 million, based on estimated levels of sales and assuming normal weather conditions. Retail direct access, which allows customers to choose their elec-tric generation supplier, will be phased in over several years. Access for commercial and industrial customers will occur over a period from October 1999 to December 2000, and access for residential customers will occur after May 1, 2002. The Act also relieves the Company of the requirement in the ICC's September 1997 Order (which approved the Merger), requinng AmerenUE and AmerenCIPS to file electric rate cases or alternative regulatory plans in lilinois following consummation of the Merger to reflect the effects of net merger savings. Other provisions of the Act indude (1) potential recovcry of a
. portion of stranded costs through a transition charge collected from customers who choose another electric supplier, (2) the option to ehminate the uniform fuel adjustment clause (FAC) and to roll into base rates a histoncal level of fuel expense and (3) a mechanism to securitize certain future revenues.
The Company's accounting policies and financial statements conform to GAAP applicable to rate-regulated enterpnses and reflect the effects of the ratemaking process in accordance with SFAS No. 71, "Accountag for the Effects of Certain Types of Regulation. Such effects concern mainly thc time at which various items enter into the determination of net income in order to follow the principle of l i matching costs and revenues. For example, SFAS 71 allows the Company to record certain assets and liab;hties (regulatory assets and regulatory habikties) which are expected to be recovered or settled in future rates and would not be recorded under GAAP for nonregulated entities. In addition, reporting under SFAS 71 allows companies whose service obligations and prices are regulated to maintain assets on their balance sheets representing costs they reasonably expect to recover from customers, through inclusion of such costs in future rates. 5FAS 101, " Accounting for the Discontinuance of Apphcation of FASB Statement No. 71," specifies how an enterprise that ceases to meet the c6teria for application of SFAS 71 for all or part of its operations should report that event in its financial statements. In general, SFAS 101 requires that the enterprise report the discontinuance of SFAS 71 by ekminating from its bal-ance sheet all regulatory assets and liabilities related to the portion of the business which no longer meets the SFAS 71 criteria. At its July 24,1997 meeting, the Emerging issues Task Force of the Financial Accounting Standards Board (EITF) concluded that apphcation of SFAS 71 accounting should be discon-tinued once sufficiently detailed deregulation legislation is issued for a separable portion of a business for which a plan of deregulation has been established. However, the El1F further concluded that regula-tory assets associated with the deregulated portion of the business, which will be recovered through tanffs charged to customers of a regulated portion of the business, should be associated with the regu- ' lated portion of the business from which future cash recovery is expected (not the portion of the busi-ness from which the costs originated), and can therefore continue to be carried on the regulated enti-ty's ba!ance sheet to the extent such assets are recovered. In additicsn, 5FAS 121 establishes accounting standards for the impairment of long-lived assets (see Note 1 - Summary of Significant Accounting Pohcies for further information). Due to the enactment of the Act, pnces for the retail supply of electric generation are expected to transition from cost-based, regulated rates to rates determined ;n large part by competitive market
, forces in the state of Illinois. As a result, the Company discontinued application of SFAS 71 for the Illinois etail portion of its generating business (i.e., the portion of the Company's business related to the supp!y of electric energy in Illinois)in the fourth quarter of 1997. The Company has evaluated the impact of the Act on the future recoverability of its regulatory assets and liabilities related to the gener-ation portion of its business and has determined that it is not probable that such assets and habilities 3 will be recovered through the cash flows from the regulated portion of its business. Accordingly, the l Company's generation-related regulatory assets and liabikties of its lihnois retail electric business were written off in the fourth quarter of 1997, resulting in an extraordinary charge to earnings of $52 mil- ,
lion, net of income taxes, or 38 cents per share. These regulatory asse's and habilit;es included previous-ly incurred costs originally expected to be collected / refunded in future revenues, such as fuel contract restructuring costs, deferred charges related to a generating plant, costs associated with an abandoned scrubber at a fossil plant, and income tax-related regulatory assets and liabilities. In addition, the Company has evaluated whether the recoverabikty of the costs associated with its remaining net gener-ation-related assets have been impaired as defined under SFAS 121. Tha Company has concluded that impairment, as defined under SFAS 121, does not exist and that no plant write-downs are necessary at k 3meras n
f Y this time. At December 31,1997, the Company's net investment in generation facikties related to its lilinois retail jurisdiction approximated $836 milhon and was included in electric plant in-service on the Company's consolidated balance sheet. The prcMsions of the Act could also result in lower revenues, reduced profit margins and increased costs of capital. At this time, the Company is unable to determine the impact of the Act on its future financial condition, results of operations or liquidity. In Missouri, where approximately 72% of the Company's etail electric revenues are denved, a task force appointed by the MoPSC is conducting studies of electric industry restructuring and competition and is expected to issue a report to the MoPSC in 1998. A joint legislative committee is also conducting studies and is expected to report its findings and recommendations to the Missouri General Assembly. Up to this point, retail wheeling has not been allowed in Missouri; however, the joint agreement approved by the MoPSC in February 1997 as part of its merger authorization includes a provision that required AmerenUE to file a proposal for a 100-megawatt experimental retail wheeling pilot program in Missouri. AmerenUE filed its proposal with the MoPSC in September 1997. This proposal is subject to review and apprwal by the MoPSC. The Company is unable to predict the timing or ultimate outcome of electric industry restructuring in the state of Missouri, as well as its impact on the Company's future financial condition, results of operations or liquidity. The potential negative consequences of electric industry restructuring could be , significant and include the impairment and writt-down of certain assets, including generation-related plant and net regulatory assets, lower revenues, reduced profit margins and increased costs of capital. At December 31,1997, the Company's net investment in generation fachties related to its Missouri ; e jurisdiction approximated $2.7 bilkon and was included in electric plant in-service on the Company's I consolidated balance sheet in addition, at December 31,1997, the Company's Missouri net genera-tion-related regulatory assets approxnnated $462 million. In accordance with SFAS 71, the Company has deferred certain costs pursuant to actions of its regu-lators, and is currently recovering such costs in electric rates charged to customers. At December 31, the Cornpany had recorded the following regulatory assets and regulatory liability: en ndono 1997 1996 Regulatory Assets: Income taxes $640 5734 Callaway costs 99 111 Undeprecated plant costs - 41 Unamortized loss on reacquired debt 32 42 DOE decommissioning assessment 15 18 Deferred environmental remediation costs 13 11 Merger costs 28 - Other 18 21 Regulatory Assets $845 $978 Regulatory Liability: Income taxes _ 5224 $304 Regulatory Liability 5224 $304 income Taxes: See Note 7 -Income Taxes. Callaway Costs: Represents Callaway Nuclear Plant operations and maintenance expensa, property taxes and carrying costs incuned between the plant in-service date and the date the plant was reflected , in rates. These costs are being amortized over the remaining hfe of the plant (through 2024). Undepreciated Plant Costs: Represents the unamortized cost of a generating plant's scrubber plus costs of removal. Unamortized Loss on Reacquired Debt: Represents losses related to refunded debt. These amounts are being amortized over the lives of the related new debt issues or the remaining hves of the old debt issues if no new debt was issued. Department of Energy (DOE) Decommissioning Assessment: Represents fees assessed by the DOE to decommission its urar.ium enrichment facility. These costs are being amortized through 2007 as payments are made to the DOE. Deferred Environmental Remediation Costs: Represents costs, net of recoveries from insurers, relating to studies and remediation at manufactured gas sites which are recovered through environ-mental rate riders. (See Note 10 - Commitments and Contingencies for further information.) Merger Costs; Represents the portion of merger-related expenses applicable to the Missouri retail junsdiction. These costs are being amortized within 10 years, based on a MoPSC order. The Company continually assesses the recoverabikty of its regulatory assets. Under current accounting standards, regulatory assets are wntten off to earnings when it is no longer probable that 32
such amounts will be recovered through future revenues. Howeser as noted in the above paragraphs, electric industry restructuring legislation may impact the recoverability of regulatory assets in the future. In Apnl 1996, the FERC issued Order 888 and Order 889 related to the industry's wholesale electric business. In January 1998, the Company filed a combined open access tanff which conforms to the FERC's orders. NOTE 3 - Nuclear The Company has a lease agreement which provides for the financing of nuclear fuel. At Fuel Lease December 31,1997, the maximum amount that could be financed under the agreement was
$120 million. Pursuant to the terms of the lease, the Company has assigned to the lessor certain contracts for purchase of nuclear fuel. The lessor obtains, through the issuance of commercial paper or frorn direct loans under a committed revolving credit agreement from commercial banks, the nec-essary funds to purchase the fuel and make interest payments when due.
The Company is ebhgated to reimburse the lessor for all expenditures for nuclear fuel, interest and related costs. Obligatior.s under this lease become due as the nuclear fuel is consumed at the Company's Callaway Nuclear Plant. The Company reimbursed the lessor $31 million during 1997,
$37 million during 1996 and $34 milhon during 1995.
The Company has capitalized the cost, including certain interest costs, of the leased nuclear fuel and has recorded the related lease obligation. During each of the years 1997,1996 and 1995, the total interest charges under the lease were $6 million (based on average interest rates of 5.8%, -} 5.7% and 6.1%, respectively) of which $3 million was capitalized in each respective year. 3 NOTE 4 - Preferred At December 31,1997 and 1996, AmerenUE and AmerenCIPS had 25 milkon shares and 4.6 million shares, Stock of respectively, of authonzed preferred stock. Subsidiaries in 1997, ArnerenUE redeemed $64 milkon of preferred stock (see note (b)in table below). AmerenUE retired 260 shares, $6.30 Series preferred stock in 1996. Outstanding preferred stock is redeemable at the redemption prices shown belew (in millions): December 31, 1997 1996 Preferred Stock Not Subject to Mandatory Redemption Preferred stock outstanding (entitled to cumulative dividends) Redemption Price (per share) Without par value and stated value of $100 per share -
$7.64 Series - 330,000 shares $103.82 - note (a) $ 33 $ 33
$7.44 Series 330,001 shares 101.00 - note (b) -
33
$6 40 Series - 300,000 shares 101.50 - note (b) -
30
$5 50 Series A - 14,000 shares 110.00 1 1
$4.75 Series - 20,000 shares 102.176 2 2
$4.56 Series - 200,000 shares 102.47 20 20
$4.50 Series - 213,595 shares 110.00 - note (c) 21 21 54 30 Series - 40,000 shares 105.00 4 4
$4.00 Series - 150,000 shares 105.625 15 15
$3.70 Series - 40,000 shares 104.75 4 4
$3.50 Series - 130,000 shares 110.00 13 13 With par value of $100 per share -
4.00% 5eries - 150,000 shares 101.00 15 15 4.25% Series - 50,000 shares 102.00 5 5 4.90% Series - 75,000 shares 102.00 8 8 4.92% Series - 50,000 shares 103.50 5 5 5.16% Series - 50,000 shares 102.00 5 5 1993 Auction - 300,000 shares 100.00 - note (d) 30 30 6.625% Series - 125,000 shares 100.00 - note (e) 12 12 Without par value and stated value of $25 per share - l . $1.735 Serie3 - 1,657,500 shares 25.00 - note (f) 42 42 Total Preferred Stock Not Subject to Mandatory Redemption $235 $298 Preferred Stock Subject to Mandatory Redemption Preferred stock outstanding without par value (entitled to cumulative dividends) Stated value of $100 per share-
$6.30 Series - 0 and 6,240 shares at respective dates $100.00 - note (b) 5- $ 1 Total Preferred Stock Subject to Mandatory Redemption 5- $ 1 (a) Beginning February 1s. 2003, eventualh dechning to 1100 per srwe (b) AmerenUE redeemed this series in 199T (O in the event of voluntary hquidation, 510s 50.
(d) Dmdend rates. and the penads dunng WNch ksch rates apply, vary depending on the Companys selection of certain defined dudend perod lengths The average dmdend rate dunng 1997 was 3 98% (c) Not redeemab6e pnor to october 1.1998 (f) Not redeemable pror to Augtst 1,1998. b 33
)
NOTE $ - Short term borrowings of the Company consist of bank loans (matunties generally on an overnight Short Term b,ws) and cornmeraal paper (matunties generally within 10-45 days). At De< ember 31,1997 and 1996, Borrowings 186 milhon Md $69 million, repectively, of short-term borrowings were outstanding. The weighted average interest rates on borrowings outstanding at December 31,1997 and 1996, were 6.5% and l 6.4%, resp &tively At December 31,1997, the Company had comrrutted bank lirts of credit aggregating $259 million (of which $244 rNison were unused and $179 million were available) which make available interim finanang at vonous rates of interest based on UBOR, the bank certificate of deposit rate, or other options. The<e 1:nes of creidit are renewable annually at vanous dates throughout the year. NOTE 6- Long temt d ebtpitstanding at Decemoer 31,_ _ _ _ _ _ _ _ _ 1997 _ _ 1996 Long Term Debt on naiam ' ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ of Subsidiaries ilisiM6rtgage Boridi!niisTa)~ ~
~ 5 Y&senes paidiri19C ~ ~" ~
- ~ ~ ~ ~ ~ ~
~ ~$^ T $~M 6 %% 5enes X paid in 1997
- 43 6 %% 5enes due 1999 100 100 7 %% Senes W due 1999 50 50 8.33% Senes due 2002 75 75 .
6 %% Senes Z due 2003 40 40 7.65% Series due 2003 100 100 6 %% Series due 2004 188 188 d 7 %% Senes due 2004 85 85 7 %% Senes X due 2007 50 50 6 %% Senes due 2008 148 148
'7 61% 1997 Series due 2017 40 -
7.40% Series due 2020 - note (b) 60 60 8 %% Series due 2021 125 125 8% Ser es due 2022 85 85 8 %% Series due 2022 104 104 7.15% Senes due 2023 75 75 7% 5enes duc 2024 100 100 5 45% Senes due 2028 - note (b) 44 44 Otijer 6% - 8.5% due 1999 through 2022 186 _ 121 _ 1,655 1,633 Env_ironmental Improvement /Pollutic.n Control Revenue Bonds 1984 Senes A due 2014 - note (c) 80 80 1984 Series B due 2014 - note (r) 80 80 1985 Senes A due 2015 - note (W 70 70 1985 Senes B due 2015 - note (d) 57 57 1990 Series B 7.60% due 2013 32 32 1991 Senes due 2020 - note (d) 43 43 1992 Series due 2022 - note (d) 47 47 1993 Senes A 6 %% due 2028 35 35 1993 Senes C-1 due 2026 - note (e) 35 35 Other 4.375% ' / 6% due 2014 through 2028 _ 80
~ ~ ~ ~ ~559. __ '559~ 80,
~~ ~ '
Sidisrdina~ tid Daerrable tr'deresfDcibenturei ~ [7 69%)eriss A[due'2036 h note (f)[ Unsomred Loans [~ _ _ . . _ __66 ] ] 6{ ,
~~
~~5 ~~7
~ '
~~Comineroaf papsr! nciti(f 3 Credit agreements - note (h) 21 -
1991 Senior Medium Term Notes 8 60% due through 2005 54 60 _1994 Spgr Medium Term No_tes 6 61% due through 2005 __ _ _ _ 62 _ _ 70 172
~ ~ ~ T17 ~ - ~150 NEleaiFWilsh-~ ~~~~~ 106 UIsrno' rthsd D5 count and Pieiniuih~6riDebt (11) (13)
MaiuiiUes DMWithlriO'n'e Ve'ai ~~ ~~~ ~ ~ ~ ~ ~ ~ ~~ ~ ~ ~ ~ ~ ~ ~~52,506'
~'~ '2) ~ ~ I146)
(5 Totaf LorifierrriDebt sD36' (a) At Owemter 3 t.1997, butatantialty all of 17e pryerty erd plant was mtwtgwyd un&r. and subpect to hens of, tte enpec tive ar*ntwes pursucit to wturb tre tuuh wee mucd (td (nwtmentalimprowment seres k) on June 1 of esih year, tte artte<est rate is estatNed for tte folinweg year, or altematrely at the optm of Itr cunpany. rnay te fmed until rnatunty A per annum rate of 3 95% is rNer1,w for tte year ee&d fAny 3 t,1998 Dventier, the interest rates wdl detend on frwh et cord tuts ard tre sele (tion of an annual versus rem,riing life rette by tre corripany be awrsje entwest rate far it+ year 1W7 ws,3 8M (d) Interest ratet, and tie peruh durirvJ wNrh such rates appy vary depentbrq on tre combinys selection of certain defued rate modes De avenarp interest rates for ite year 1997, for 198s sern A,196 serm B,1991 seres arx11992 seres burgh were 3 61% 3 82% 3 fl6% and 3 83% respettrwly 34
(e) The interest rate for the year 1997 was 4 20% This anterest rate wil be adiusted to a then cunent market rate on Aunust 15,1998. Actual interest rates, and the penods dunng vtuch such rates appN vary depending on the Company 3 selecton of certain defined rate modes. (f) Dunng the terms of the debentures, the Company rnay, under certain arcumstances, defer the payment of anterest for up to five years. (g) A bank credit agreement, due 1999, permrts the Company to borrow or to support commeraal paper borrowings up to s300 mdion. Interest rates wdl vary depending on market condrbora At December 31,1997, the outstanding commeraal paper was at an average annualcw rate of s 93% (h) Bank credit agreements, due 2002, permit the Company to borrow up to 542 mdl. ort interest rates vary depending on rnarket cordtions and the companys selecton of vanous optsons under the agreements At December 31,1997, the average annual; zed interes rate was 6.1s%
- 6) A bank credit agreement, due 1999, permits the Company to borrow up to s200 mdlon interest rates wdl vary deperdng on market condi-tions and the company) selection of varous optons under the agreement. At December 31,1997, no sur.h borrowings were outstanding Matunties of long-term debt through 2002 are as follows:
6n m nons) Principal Amount 1998 $ 52 1999 209 2000 49 2001 44 2002 134 Amounts for years subsequent to 1998 do not include nuclear fuel lease payments since the amounts ,I of such payments are not currently determinable. NOTE 7 - Total income tax expense for 1997 resulted in an effective tax rate of 38% on eamings before Income Taxes income taxes (40% in each of 1996 and 1995). Principal reasons such rates differ from the statutory federal rate: 1997 1996 1995 Statutory federal income tax rate: 35 % 35 % 35 % increases (Decreases)from: Depreciation differences 1 1 1 State tax 4 4 4 Other (2) - - Effective income tax rate 38 % 40 % 40 % income tax expense components: 6n maions) 1997 1996 1995 Taxes currently payable (principally federal): Included in operating expenses $261 $255 $267 Included in other income - Miscellaneous, net - - (1) 261 255 266 Deferred taxes (principally federal): Included in operating expenses - Depreciation differences (11) 2 10 Postretirement benefits - - (9) Other (7) 5 2 Included in other income - Depreciation differences - 1 1 ]' Other 10 - - (8) 8 4 - Deferred investment tax credits, amortization: Included in operating expenses (9) (9) (9) Total income tax expense $244 $254 5261 In ar.cordance with 5FA5109, " Accounting for income Taxes," a regulatory asset, representing the probable recovery from customers of future income taxes, which is expected to occur when temporary differences reverse, was recorded along with a corresponding deferred tax liabikty. Also, a regulatory liability, recognizing the lower expected resenue resulting from reduced inccme taxes associated with amortizing accumulated deferred investment tax credits, was recorded. Investment tax credits have been deferred and will continue to be credited to income over the lives of the related property. The Company adjusts its deferred tax liabikties for changes enacted in tax laws or rates. Recognizing that regulators will probably reduce future revenues for deferred tax liabilities initially recorded at rates in excess of the current statutory rate, reductions in the deferred tax liability were credited to the regulatory liability. husrse as
Temporary differences gave rise to the following deferred tax assets and deferred tax liabilities at December 31: On milions) 1997 1996 Accumulated Deferred income Taxes: Depreciation $1,045 $1,070 Regulatory assets, net 451 488 Capitalized taxes and expenses 176 210 (46) (48) j Deferred benefit costs Regulatory liabikties, net (42) (46) l Other 9 23 Total net accumulated deferred income tax liabilities $1,593 $1,697 NOTE 8 - The Company has defined-benefit retirement plans ccuering substantially all of its employees. Retirement Benefits are based on the employees' years of service and compensation. The Company's plans are Benefits funded in compliance with income tax regulations and federal funding requirements. , Following is the pension plan information related to AmerenUE's plans as of December 31: Pension costs for the years 1997,1996 and 1995, were $24 million, $28 million and $26 million, respectively, of which approximately 17%,19% and 20%, respectively was charged to construction 4 accounts. Funded Status of Pension Plans: On niihns) 1997 1996 1995 Actuarial present value of benefit obligation: Vested benefit obligation S 705 $661 $679 Accumulated benefit oblicjation S 829 $752 $758 Projected benefit obligation for service rendered to date $ 999 $919 $913 Less: Plan assets at fair value* 1,006 924 847 (Excess) Deficiency of plan assets versus projected benefit obligation (7) (5) 66 Unrecognized net gain 115 96 22 Unrecognized prior service cost (69) (76) (82) Unrecognized net assets at transition 7 8 9 Accrued pension cost at December 31 $ 46 $ 23 $ 15
- Plan assets consist pnnapally of common stocks and faed income secunties.
Compo_nents of Net Pension Expense: en miliens) 1997 1996 1995 Service cost - benefits earned during the period 5 22 $ 22 $ 19 Interest cost on projected benefit obligation 69 65 66 Actua! return on plan assets (134) (107) (166) . Net amortization and deferral 67 48 107 Pension cost 5 24 $ 28 $ 26 Assumptions for Actuarial Present Value of Projected Benefit Obligations: 1997 1996 1995 Discount rate at measurement date 7.0% 7.5% 7.25 % increase in future compensation 4.0% 4.5% 4.25 % Plan assets long-term rate of return 8.5% 8.5% 8.5% 36 e
AmerenCIPS uses a September 30 measurement date for its valuation of pension plan assets and liabili-ties. Follosuing is the pension plan information related to AmerenCIPS' plan as of December 31: Pension costs for the years 1997,1996 and 1995, were $5 million, $4 mill.on and $6 million, respectively, of which approximately 15% in 1997 and 1996 and 18% in 1995 was charged to construction accounts. Funded Status of Pension Plan: On milhans) 1997 1996 1995 Actuarial present value of benefit obligation: Vested benefit obligation $164 $148 $121 Accumulated benefit obligation $190 $171 $142 Projected benefit obligation for service rendered to date $234 $211 $181 Less: Plan assets at fair value* 315 253 221 (Excess) of plan assets versus projected benefit obligation (81) (42) (40) Unrecognized net gain 76 40 33
) Unrecognized prior service cost (11) (11) (5) J Unrecognized net assets at transition 3 3 4 Prepaid pension costs at September 30 (13) (10) (8)
Ex2ense, net of funding October to December (2) (1) - Prepaid pension cost at December 31 $ (15) $ (11) $ (8)
- Plan anets consst pnnapally of common and preferred stocks, bonds, money market ristruments and real estate.
Components of Net Pension Expense: 6n mdhons) 1997 1996 1995 Service cost - benefits earned during the period $7 $7 $7 Interest cost on projected benefit obligation 16 13 12 Actual return on plan assets (60) (30) (34) . Net amortization and deferral 42 14 21 Pension cost $5 54 56 Assumptions for Actuarial Present Value of Projected Benefit Obligations: 1997 1996 1995 Discount rate at measurement date 7.5% 7.5% 7.5% increase in future compensation 4.5% 4.5% 4.5% Plan assets long-term rate of return 8.5% 8.5% 8.0 % in addition to providing pension benefits, the Company provides certain health care and life insur-ance benefits for retired employees. Substantially all of the Company's employees may become eligi-ble for those benefits if they reach retirement age while working for the Company. The Company accrues the expected postretirement benefit costs during employees' years of service. 1 l
)
i i
@3msnm n !
1 l
The following is information related to AmerenUE's postretirement benefit plans as of December 31: AmerenUE's funding policy is to annually contribute the net periodic cost to a Voluntary Employee Beneficiary Association trust (VEBA). Postretirement benefit costs were $44 million for each of the years 1997,1996 and 1995, of which approximately 17% was charged to construction accounts in 1997 and 19% in each of 1996 and 1995. AmerenUE's transition obligation at December 31,1997, is being amortized over the next 15 years. In August 1994, the MoPSC authorized the recovery of postretirement benefit costs in rates to the extent that such costs are funded. In December 1995, the Company established two external trust funds for retiree health care and life insurance benefits. For 1995, actual claims paid were approximately $15 million. In 1997 and 1996, clairns were paid out of the plan trust funds. Funded Status of the Plans: 1997 1996 1995 (in mdliono Accumulated postretirement benefit obligation: Active employees eligible for benefits 5 41 $ 38 5 74 Retired employees 202 193 211 Other active employees 90 80 32 Total benefit obligation 333 311 317 81 47 14 Less: Plan assets at fair market value* Accumulated postretirement benefit obligation in excess of plan assets 252 264 303 Un7 cognized -transition obligation (187) (200) (213)
- gain /(loss) 18 19 (7) 5 83 $ 83 $ 83 hstretirement benefit liability at December 31 ' Plan assets consst pnncpfly of common stocks and fmed income secunties Components of Postretirement Benefit Cost:
(in m,ilione 1997 1996 1995 Service cost - benefrts earned during the period $12 $12 $10 Interest cost on projected benefit obligation 23 22 24 Actual return on plan assets (9) (4) - Amortization - transition obligation 12 12 12
- unrecognized gain (1) (1) (2)
Deferred _3ain 7 3 _ - Net periodic cost $44 $44 __ $44 Assumptions for the Obligation Measurements: 1997 1996 1995 Discount rate at measurement date 7% 7.5% 7.25 % Plan assets long term iate of return 8.5% 85% 8.5% Medical cost trend rate -inrtial 7% 8.25 % 9.25 %
- ultimate 5% 5.25 % 5.25 % ,
Ultimate medical cost trend rate expected in year 2000 2000 2000 A 1% increase in the medical cost trend rate is estimated to increase the net periodic cost and the accumulated postretirement benefit obligation approximately $3 million and $23 million, respectrvely. 38
The following is information related to AmerenCIPS' postretirement benefit plans as of December 31: AmerenCIPS' funding policy is to fund the two VEBAs and the 401(h) account estdished within the AmerenCIPS retirement income trust with the lessor of the net periodic cost or the amount deductible for federal income tax purposes. AmerenCIPS uses a September 30 measurement date for its valuation of postretirement assets and liabilities. Postretirement benefit costs were $12 million for 1997, $16 million for 1996 and $17 million for 1995, of which approximately 17% was charged to construction accounts in 1997 and 15% in each of 1996 and 1995. AmerenCIPS' transition obligation at December 31,1997, is being amortized over the next 15 years. Funded Status of the Plans:
> mnons) 1997 1996 1995 Accumulated postretirement benefit obligation:
Active employees eligible for benefds $ 23 $ 20 $ 17 Retired employees 47 54 50 Other active employees 67 65 76 Total benefit obligation 137 139 143
$ 106 71 49 Less: Plan assets at fair market value*
Accumulated postretirement benefit obligation
- in excess of plan assets 31 68 94 Unrecognized -transition obligation (84) (89) (99)
- gain 64 38_ 24 Accrued postretirement benefit cost at September 30 11 17 19 Expense, net of funding, October to December (7) (14) (15)
Postretirement benefit liability at December 31 54 , $3 54 Pun assets consist pnnapally of common and preferred stocks, tud money market instruments and reai estate. Components of Postretirement Benefit Cost: on m oong 1997 1996 1995 Service cost - benefits earned during the period S4 $4 $4 Interest cost on projected benefit obligation 10 11 10 Actual return on plan assets (21) (9) (8) Amortization of transition obligation 6 6 6 Deferred gains 13 4 5 Net periodic cost $ 12 $16 $17 Assumptions for the Obligation Measurements: 1997 1996 1995 Discount rate at measurement date 7.25 5 7.5% 7.5 % Plan assets long-term rate of return 8.5 % 8.5% 8.0 % Medical co:t trend rate -initial 8.5 % 9.8% 10.6 %
- . - ultimate 5.5% 4.5"n 4.0 %
Ultimate medical cost trend rate exnected in year 2005 2005 2007 A 1% increase in the medical cost trend rate is estimated to increase the net periodic cost and the accumulated postretirement benefit obligation as of September 30,1997 approximately $3 million and
$22 million, respectively.
NOTE 9 - AmerenUE has a long-term incentive plan (the Plan) for eligible employees. The Plan provides for the Stock Option grant of options, performance awards, restricted stock, dividend equivalents and stock appreciation Plans rights. Under the terms of the Plan, options may be granted at a price not less than the fair market value of the common shares at the date of grant. Granted options vest over a period of five years, beginning at the date of grant, and provide for acceleration of exerosability of the options upon the occurrence of certain events, induding retirement. Outstanding options expire on various dates through 2007. Under the Plan, subject to adjustment as provided in the Plan, 2.5 milhon shares have been authorized to be issued or delivered. HWW 39
Summary of Stock Options:
~
1997 1996 ' 1995 Options outstanding at beginning of the year 307,390 142,500 - Options granted during the year 195,880 165,590 142,500 Options exercised during the year - Options expired / canceled during the year 7,200 700 - Options outstanding at end of theyear 496,070 307,390 142,500 Options exercisable at end of the year _ 134,785 39,710 9,800 Exercise price rance of ootions oranted $38.50 $43 ,$35.50-535 875 ) in accordance with APB 25, no cornpensation cost has been recognized for the Company's stock com- ! pensation plans. In 1996, the Company adopted the disdosure-only method under SFAS 123,
Accounting for Stock-Based Compensation." If the fair value based accounting method under this statement had been used to account for stock-based compensation cost, tr'e effects on 1997,1996 and 1995 net income and earnings per share would have been immaterial.
i The Company's calculation of basic and diluted earnings per share resulted in the same earnings per
+
share amounts for each of thnears 1997,1996 and 1995. The reconcikng rtem in each of the years is l comprised of assumed stock option conversions which increased the number of shares outstanding in the dduted eamings per share calculation by 7,318 shares,12,879 shares and 3,892 shares in 1997, 1996 and 1995, respectively. . NOTE 10 - The Company is engaged in a construction program under which expenditures averaging approximately Commitments $333 million, iriduding AFC, are anticipated dunng each of the next five yaars. This estimate does not and Contingencies include any construction expenditures which may be incurred by the Company to meet new air quality > standards for ozone and particulate matter, as discussed later in this Note. The Company has commitments for the purchase of coal under long-term contracts. Coal contract commitments, including transportation costs, for 1998 through 2002 are estimated to total $1.5 bilhon. Total coal purchases, induding transportation costs, for 1997,1996 and 1995 were $476 million, $514 mithon and $460 million, respectively. The Company also has existing contracts with pipekne and natur-al gas suppliers to provide natural gas for distribution and electric generation. Gas-related contracted cost commitments for 1998 through 2002 are estimated to total $212 million. Total delivered natural gas costs for 1997,1996 and 1995 were $160 milkon, $161 million and $127 million, respectively. The Campany's nuclear fuel commitments for 1998 through 2002, including uranium concentrates, conver-sion, enrichment and fabrication. are expected to total $116 million, and are expected to be financed under the nuclear fuel lease. Nudea fuel expenditures for 1997,1936 and 1995 were $35 million, $51 million and $42 million, respectively. Additionally, the Company has long-term contracts with other utili-ties to purchase electric capacity. These comrnitments for 1998 through 2002 are estimated to tota l
$187 million. During 1997,1996 and 1995, electric capacity purchases were $34 million, $44 million and $42 milhon, respectively.
During 1996, the Company restructured its contract with one of its major coal suppliers. In 1997, the Company paid a $70 milhon restructuring payment to the suppher, which allows them to purchase at market prices low-sulfur, non-lllinois coal through the suppher (in substitution for the high-sulfur Illinois , coal the Compary was obligated to purchase under the original contract); and would receive options for future purchases ei hwv-sulfur, non-lliinois coal from the supplier through 1999 at set negotiated prices. By switching to low-sulfur coal, the Company was a: e to discontinue operating a generating station scrubber. The benefits of the restructuring incluae lower cost coal, avoidance of significant m capital expenditures to renovate the scrubber and elimination of scrubber operations and mainte-nance costs (offset by scrubber retirement expenses). The net benefits of restructuring are expected to exceed $100 million over the next 10 years. In December 1996, the ICC entered an order approv-ing the switch to non-lllinors coal, recovery of the restructuring payment plus associated carrying costs (Restructunng Charges) through the retail FAC over six years, and continued recovery in rates of the undeprJed scrubber investment plus costs of removal. Additionally, in May 1997 the FERC approved : Dy of ths molesale portion of the Restructuring Charges through the wholesale FAC. As a result of the IC(. and FERC orders, the Company classified the $72 million of the Restructuring Charges made to the coal supplier in February 1997 as a regulatory asset and, through December 1997, recovered approximately $10 million of the Restructuring Charges through the retail FAC and from wholesale customers. A group of industrial customers filed with the Illinois Third District Appellate Court (the Court) in February 1997 an appeal of the December 1996 order of the ICC On November 24,1997, the Court reversed the ICCt December 1996 order, finding that the Restructuring Charges were not direct costs 40
of fuel that may be recovered through the retail FAC, but rather should be considered as a part of a review oi aggregate revenue t'quirements in a full rate case. Restructunng Charges allocated to whole-Sale customers (approximately $7 million) are not in question as a result of the opinion of the Court. In December 1997, the Company requested a rehearing by the Court; that request was denied. However, the Court did rule that all revenues collected under the retail FAC in 1997 would not have to be refunded to customers. The Company has appealed to the ll!inois Supreme Court the CouWs decision that Restructuring Ch>.rges may not be recovered through the retail FAC. The recoverabihty of the Restructunng Charges under the retail FAC b liknois was also impacted by the Electric Service Cunomer Choice and Rate Relief Law of 1997 (the Act). Among other things, the Act provides utilities wiih the ootion to ehminate the retail FAC and hmits the ability of utilities to file a full rate case for its aggregate revenue requirements. After evaluating the impact of the Act on the ' future recoverability of the Company's Restructuring Charges through fut'.;re rates, the Company con-cluded that the unamortized balance of the liknois retail portion of its Restructuring Charges as of December 31,1997, should be written cff ($34 million, net of income taxes). See Note 2 - Regulatory l Matters for further information. ' The Company's insurance coverage for Callaway Nuclear Piant at December 31,1997, was as follows:
$ Type and Source of Coverage Eraiions) n Maximum Maxibm Coverages Assessres for Sirye incidents Pubhc Liabikty:
American Nuclear insurers 5 200 $- Pool Participation 8,720 79(a)
$8,920 (b) $79 Nuclear Worker liabikty:
American Nuclear insurers $ 200(c) $3 Property Damage: Amencan Nuclear insurers 5 500 $- Nuclear Electoc Insurance Ltd. _
?,250_(d.! 1_1_ j l
$2 750 $11 Replacernent Power:
Nuclear Electric Insurance Ltd. $ 473 (e) $4 (a) Retrowectwe premiurr und(r the PrKe-Anderson hatnhty prova>ns of the Atomic Energy Act of 1954, as amended, (Pnce-Anderson) sutnect to retrosput've au,essment w'th re.pect to ims hom an mdent at any u s reactor, payable at Slij md: ion per year. j (b) umit of hatukty for each inodent under Pnce Anderson J i (c) Industry ist for potentJ babik'y from woners damng expowe to the heard of nuclear radiatm (d) Indudes premature decommassorn; ccnts (e) VVeekly indemnity of 53 s mdhon, for 52 weeks wNch commerr.es after the first 21 weeks of an outage, plus 52 8 mdhon r,er week for 104 weeks thereafter Price-Anderson kmits the liabihty for claims from an incident involving any bcensed U.S. nuclear j fachty. The hmit is based on the number of licensed reactors and is adjusted at least every five years i a based on the Consumer Price Index. Utihties owning a nuclear reactor cover this exposure through a { combination of pnvate insurance and mandatory participation in a financial protection pool as estab- l lished by Price-Anderson.
. If losses from a nuclear incident at Callaway Plant exceed the limits of, or are not subject to, insur-ance, or if coverage is not available, the Company will self-insure the risk. Although the Company !
has no reason to anticipate a serious nuclear incident, if one did occur it could have a material but ) indeterminable adverse effect on the Company's financial position, results of operations or hquidity. Under the Title IV of the Clean Air Act Amendments of 1990, the Company is required to signifi-cant!y reduce total annual sulfur dioxide emissions by the year 2000 Significant reductions in nitro-gen oxide are also required. By switching to low sulfur coal and early banking of emission credits, the Company anticipates that it can comply with the requirements of the law wdhout significant rev-enue increases because the related capital costs are largely effset by lower fuel costs. As of yez -end 1997, estimated remaining capital costs expected to be incurred pertaining to Clean Air Act-related l projects totaled $107 million. bknera? 4t a
7
/
in July 1997_, the United States Environmental Protection Agency (EPA) issued final regulations revis- ') ing the National Ambient Air Quality Standards for ozone and particulate matt?r. Although specific emission control requirements are still being developed, it is beheved that the revised standards will require significant additional reductions in nitrogen oxide and sulfur dioxide emissions from coal-fired boilers. In October 1997, the EPA announced that Missouri and Illinois are included in the area targeted for nitrogen oxide emissions reductions as part of the EPA's regional control program. Reduction requirements in nitrogen oxide emissions from the Company's coal-fired boilers could exceed 80% from 1990 levels by the year 2002. Reduction requirements in sulfur dioxide emissions may be up to 50% beyond that already required by Phase il acid rain control provisions of the 1990 Clean Air Act Amendments end could be required by 2007. Because of the magnitude of these additional reductions, 1 the Company could be required to incur significantly higher capital costs to meet future compliance obligations for its coal-fired boilers or purchase power from other sources, either of which could have significantly higher operations and maintenance expenditures associated with compliance. At this time, the Company is unable to determine the impact of the revised air quality standards on its future finan-cial condition, results of operations or liquidity. In December 1997, the United States and numerous other countries agreed to certain environ-mental provisions (the Kyoto Protocol), which would require decreases in greenhouse gases in an effort to address the " global warming" issue. The Company is unable to predict what requirements, if any, will be adopted in this country. However, implementation of the Kyoto Protocol in its present form would likely result in significantly higher capital costs and operations and maintenance expendi-tures by the Company. At this time, the Company is unable to determine the impact of these pro- . posals on its future financial condition, results of operations or liquidity. As of December 31,1997, the Company's utility operating subsidiaries were designated as poten-tially responsible parties (PRP) by federal and state environmental protection agencies at five haz-ardous waste sites. Other hazardous waste sites have been identified for which the Company may be responsible but has not been designated a PRP. Costs relating to studies and remediation and associated legal and litigation expenses at the sites located in Illinois are being accrued and deferred rather than expensed currently, pending recovery through rates. Through December 31,1997, the total of the costs deferred, net of recoveries from insur-ers and through environmental adjustment clause rate riders approved by the ICC, was $13 million. The ICC has instituted a reconciliation proceeding to review the Company's environmental remedi-aton activities in 1993,1994 and 1995 ar.d to determine whether the revenues collected under the riders in 1993 were consistent with the amount of remediation costs prudently and properly incurred. Amounts found to have been incorrectly included under the riders would be subject to refund. In mid-1997, the Company and the ICC Staff submitted a stipulation with regard to all mat-ters at issue which concluded that the amounts collected under the environmental rate ric%r were appropriate in all material repects. A ruling from the ICC is still pending. The Company continually reviews remediation costs that may be required for all of these sites. Any unrecovered environmental costs are not expected to have a material adverse effect on the Company's financial position, results of operations or liquidity. The International Union of Operating Engineers Local 148 and the International Brotherhood of Electrical Workers Local 702 filed unfair labor practice charges with the National Labor Relations Board (NLRB) relating to the legality of the lockout by AmerenCIPS of both unions during 1993 The NLRB has issued complaints against AmerenCIPS concerning its lockout. Both unions seek, among other things, back pay and other benefits for the period of the lockout. The Company estimates the amount of back pay and other benefits for both unions to be approximately $17 million. An adminis-trative law judge of the NLRB has ruled that the lockout was unlawful. On July 23,1996, the Company appealed to the NLRB. The Company believes the lockout was both lawful and reasonable and that the final resolution of the disputes will not have a material adverse effect on its financial position, results of operations or liquidity. . Regulatory changes enacted and being considered at the federal and state levels continue to change the structure of the utility industry and utility regulation, as we!I as encourage increased competition. At this time, the Company is unable to predict the impact of these changes on its future financial condition, results of operations or liquidity. (See Note 2 - Regulatory Matters for fur-ther information.) The Company is involved in other legal and administrative proceedings before various courts and agencies with respect to matters ansing in the ordinary course of business, some of which involve substar.tial amounts. The Company believes that the final disposition of these proceedings will not have a material adverse effect on its financial position, results of operations or liquidity. n
NOTE 11 - Under the Nudear Waste Policy Act of 1982, the DOE is responsible for the permanent storage and Callaway Nuclear disposal of spent nuclear fuel. The DOE currently charges one mill per nuclear-generated kilowatthour Plant sold for future disposal of spent fuel. Electric rates charged to customers provide for recovery of such costs. The DOE is not expected to have its permanent storage facility for spent fuel available until at least 2015. The Company has sufficient storage capaaty at Callaway Plant site until 2004 and is pursuing a viable storage alternative. This altemative will require Nuclear Regulatory Commission approval. The delayed availability of the DOE's disposal facility is not expected to adversely affect the continued opera-tion of Callaway Plant. Electric rates charged to customers provide for recovery of Callaway Plant decommissioning costs over the life of the plant, based on an assumed 40-year life, ending with expiration of the plant's operating license in 2024. The Callaway site is assumed to be decomrnissioned using the DECON (immediate dismantlement) method. Decommissioning costs, including decontamination, dismantling and site restoration, are estimated to be $451 million in current year dollars and are expected to escalate approximately 4% per year through the end of decommissioning activity in 2033. Decommissioning costs are charged to depreciation expense over Ca!Iaway's service life and amount-ed to $7 million in each of the years 1997,1996 and 1995. Every three years, the MoPSC requires the Company to file updated cost studies for decommissioning Callaway, and electric rates may be adjusted at such times to reflect changed estimates. The latest study was filed in 1996. Costs collect-ed from customers are deposited in an external trust fund to provide for Callaway's decommission-ing. Fund earnings are expected to average 9.25% annually through the date of decommissioning. if the assumed return on trust assets is not earned, the Company believes it is probable that such earnings deficiency will be recovered in rates. Trust fund earnings, net of expenses, appear on the consolidated balance sheet as increases in the nudear decommissioning trust fund and in the accu-mulated provision for nuclear decommissioning. The staff of the SEC has questioned certain current accounting practices of the electric utility industry, regarding the recognition, measurement and classification of decommissioning costs for nuclear generating stations in the financial statements of electric utilities. In response to these ques-tions, the Financial Accounting Standards Board has agreed to review the accounting for removal costs, including decommissioning. The Company does not expect that changes in the accounting for nuclear decommissioning costs will have a material effect on its financial position, results of opera-tions or liquidity. NOTE 12 - The following methods and assumptions were used to estimate the fair value of each class of Fair Value of financial instruments for which it is practicable to estimate that value. Financial l Instruments Cash and Temporary investments /Short-Term Borrowings The carrying amounts approximate fair value because of the short-term matunty of these instruments. Marketable Securities The fair value is based on quoted market prices obtained from dealers or investment managers. Nuclear Decommissioning Trust Fund The fair value is estimated based on quoted market pnces for securities-Preferred Stock of Subsidiaries The fair value is estimated based on the quoted market pnces for the same or similar osues Long-Term Debt of Subsidiaries The fair value is estimated based on the quoted market prices for same or similar issues or on the cut rent
, rates offered to the Company for debt of comparable matunties Carrying amounts and estimated fair values of the Company's financial instruments at December 31 l were as follows:
6n mn w 1997 1997 1996 1996 , Carrying Fair Canying Fair ) Amount Value Amount Value J Marketable secunties 5 32 $ 32 5 51 $ 51 Preferred stock 235 214 299 257 I Lono-term debt (including current portion) 2,558 2,692 2.482 2.545 l l l i
The Company has investments in debt and equity securities that are held in trust funds for the pur-pose of funding the nuclear decommissioning of Callaway Nuclear Plant (see Note 11 - Callaway Nuclear Plant). The Company has classified these investments in debt and equity securities as available for sale and has recorded all such investments at their fair market value at December 31,1997 and 1996. In 1997,1996 and 1995, the proceeds from the sale of investments were $24 million, $20 million and $9 million, respectively. Using the specific identification method to determine cost, the gross realized gains on those sales were approximately $2 million for 1997 and $1 million each for 1996 and 1995. Net real-ized and unrealized gains and losses are reflected in the accumulated provision for nuclear decommis-sioning on the consolidated balance sheet, which is consistent with the method used by the Company to account for the decommissioning costs recovered in rates. Costs and fair values of investments in debt and equity securities in the nuclear decommissioning trust fund at December 31 were as follows: 1997 (n miions) Gross Unrealized Security Type Cost Gain (Loss) Fair Value Debt secunties $34 53 5- $ 37 Equity securities 43 40 - 83 ,
. fash_eguivalents 2 - - 2 579 $43 5- $122 1996 on minais) Gross Unrealized Security Type Cost Gain (Loss) Fair Value Debt securities $29 $2 $- $31 Equity secunties 40 22 -
62 Cash equivalents 4_ _- _4
$73 $24 5- $97 The contractual matunties of investments in debt secunties at December 31,1997 were as follows:
on mens) Cost Fair Value 1 year to 5 years 54 $4 5 years to 10 years 6 7 Due after_10 years 24 26
$34 $37 s
i 44 ___________-___a
Selected Consolidated FinancialIn ormation me ce m ru,e sum w r, sN,, Ames me) 1997 1996 1995 1994 1993 1992 Results of Operations cren e,4.o c.w ru ~
~dperating reviriues ' $3^3D $3 328 TI,236 $U76 $U77 $3547 . Operating expenses 2,744 2,752 2,658 2,685 2,724 2,514 ,
Operating income 582 576 578 585 548 533 Income before extraordinary charge 387 372 373 391 369 361 ] Extraordinary charge, net of income taxes 52 - - - - - Net incorne 335 372 373 391 369 361 Average common shares outstanding 137,215,462 131,215,462 137,215,462 137,253,617 137,254,771 137,254,771 Assets, Obligations and Equity Capital we,w su Totalassets $8;826 $8,333 $8,~788 $8329 $K,Vl6 $U3T ' Long-term debt obligations 2,506 2,335 2,373 2,413 2,301 2,213 Preferred stock subject to I- mandatory redemption - 1 1 1 1 1 Preferred stock not subject to mandatory redemption 235 298 298 298 298 283 Comrnon equity 3,019 3,016 2.971 2,917 2,840 2,781 Financial Indices r*, .n+d twu, w au
~ "Eamings per share of common stock befoi? extraordinary charge $2.82 $2.71 $2.72 $2.85 $2.69 $2.63 l Extraordinary charge, net of income taxes $(38) - - - - -
Earnings per share of common stock (based on average shares outstanding) 52.44 $2.71 $2.72 $2.85 $2.69 $2.63 Dividend payout rats 99 % 88 % 86 % 80 % 83 % 82 % Return on average common stock equity 11,14 % 12.51 % 12.76 % 13.69 % 13.18 % 13.30 % Ratio earnings to fixed charges AmerenUE 4.70 4 68 4.78 4 68 4.56 4.66 AmerenCIPS 3.64 4.30 4.41 4.93 4,82 4.12 Book value per common share $22.00 $21.98 521 65 _ $21.25 $2069 $20.26 Ca
'Tpitalization, ommon equity Ratios awe su 52.4 % 53.4% 52.6% 51.8 % 52.2 % 52.7%
Preferred stock 4.1 5.3 5.3 53 E.5 5.4 Angterm debt 43.5 41.3 42.1 42.9 42.3 41.9 _ 100.0 % 100.0 % 100.0 % 100.0 % _ 100.0 % , 100.0 % O 4s
h,ketric Operating Statistics 1995 1994 1993 1992
- m. team,me,- p.> 1997 _ 1996 Electric Operating Revenues ruuna 51,014 $1,037 $952 Residedfai~~~ $1,064 $1,070 $1,073 846 927 920 906 884 861 l Commercial 500 500 4% 487 486 520 IndJstrial 91 91 87 84 81 77 Wholesale ~
280 230 243 254 123 Interchange . 224 207. 198 201 276 251 256 eel 71 50 48 42 46 43 Miscellaneous Credit to custorners (20) (47) (33)
$3,064 $3,008 $3,030 $3,016 $2,817 Total Electric Operating Revenue $3,062 , _
K lowatthotr Sales sw.o _ __ 14,325 14,418 14.086 13,282 13,636 12,103 Residential 14,990 14,872 14,464 14,043 13.042 12,964 4 Commercial 11,404 11,191 10,971 10,728 10,407 11,371
!ndustrial 2,323 2,328 2,248 2,137 2,088 1,95.;
Wholesale 9,402 10,768 8,176 8,080 10.326 4,387 hterchange 11,220 10.554 10.850 14,594 12,521 14 037 eel 317 305 316 301 317 307 MisceHaneous 64,436 61,111 63.165 62,937 57,122 Total Kilowatthour Sales 63.981 Electric Customers unu v.,, 1,282,042 1,275,534 1,267,976 _ 1,258,757 1,248,723 , 1 243,863 _Residentsai 180,206 176,621 173,810 171,072 168,566 166,912 Commercial 6,5',4 6,660 6,782 6,750 7,137 7,067 Industrial 21 20 21 21 21 23 Wholesale Muellaneous 2,381 2,398 2,434 ~ 2,406 2,407 _ 2,367_ Tial Electric Customers 1,471,204 1,461,233 1,451,023 1,439.006 1,426,854 1,470,232 Residential Customer Data m .e Kilowatthours used 11,215 ~ 11,354 11,152 10,606 10,946 9,683 Annual electric bill 5833.34 $642.82 $849.62 $809.27 $832.46 $761.08 Revenue per kilowatthour 7.3Br 7.30c 7.62c 7.63c 7.61 c '/ .86( Gross instantaneous Peak Demand muwm ~ AmerenUE 0,055 8485 7,965 7,430 7,540 7,135 AmerenCIPS 1,923 1,892 1,940 1,854 1,848 1,649 , Upability at Time of Peak,' Including Net Purchases and Sales ws AmorenUE 8,950 9,120 8,714 8,469 8,597 8,407 4 AmerenCIPS 2,491 2,519 2,489 2,51_0 _ _ 2,439 2,534 G:nerating Capability at Time of Peak %,s AmerenUE 8,279 8,244 8,184 8,057 7,963 7,868
~~ErenCIPS Ar - 3,033 3,033 3,018 3,018 2,901 _ _ 2,881 Coal Burned cro o 21,392,000 20,062,000 17,715,000 16,885,000 14,879,000 14,843,000 Prjet per Ton of Coal w $23.54 $25.25 $26.86 $28.02 $33.36 _ $33.33 Source of Energy Supply em,m ,
Coal _ 83.8 % 79.6 % 76.3 % 76.2 % 70.7 % 73.9 % Nuclear 19.3 19.2 18.3 23.0 19.5 19.5 Hydro .. 2.7 2.8 3.6 3.9 4.6 3.5 Purchastd, net (5.8)- (1.6) 1.8 (3.1) 5.2 3.1 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 46 .+, . .. - .. .
. , s Gas OperatingStatistics yj n
. . . . , . . . , . . . - ~ . . n.- ,.
Y' p-Natural
~ ReicFniiafGas O ~'~perathrj
~ Revenues <u.u-a. . $i6i
. , . - - . - . fi37 _ . - - - . . $iB "- ~ $I$5
$ ISO iT W .,,
Commeraal 53 .:,8 53 55 61 51 . [ :' ': ' Industna! 22 21 18 24 22 13 OH system sales 13 - - - - - M&ellaneous 10 11 11 10 12 13 ! Total Natural Gas Operating Revenues $250 $254 $217 1225 5245 5218,
.D. ekath.er,m. S. ale.s.. v.u_. .,_
Comnwoa! 9 11 10 10 10 9 .c , [ . Industrial 6 5 5 6 6 3 ,-' . 'o
; OH sptem sales 5 - - - - -
Total Dekatherm Sales 43 0 39 39 42 34 ,
. . - . ,263,588 257,848 254,328 251,171 248,707 Residential . 260,989 Commeraal 30,147 29,911 29,446 29,03/ 28.676 28,393
.ingf nal, _ _ ,_, _ , ,_ _, __ ,_ _ ,_ . _ , . . 412 ,. _ _402 _._ .. _. 3 78 ,,._ _. . _3 51 __ ,__30_7 _
280,154 261 277,361 Total Natural Gas Customers 294,147 291.302 287,572 283.716 .- o . . i e
Ameren Corporation andSubsidiaries O icers and Directors Ameren Services Richard A. Lumpkin > Ot FICEsn Chairman and Chief Executive Officer - Paul A. Ag&then Ameren Corporat. son Consolidated Telephone Company a Ser.!or Vce Pmdent, Energy diversified telecommunications company Charles W. Mueller Supply Services Ctairman, President and Chief John Peters MacCarthy
- Patricia Barrett Executive Officer Retired Chairman and Chief Executive ce PtesMent Corporate Communications Officer - Boatmen's Trust Company Donald E. Brandt Ca B mer Senior Vice President, Finance Hanne M. Merriman formation Services Principal- Hanne Merriman Associates, Wn\ ham E. Jaudes Donald W. Capone a retailbusiness consulting firm Mce President and General Counsel Mce President, Engineenng & Construction
- Paul L Miller, Jr. '
Wamer L Baxter Jimmy L Davis President and Chief Executive Officer ' Contro!Ier "I ' 5"PP # PL Millerand Associates, a management Jerre E. Birdsong consulting firm a Jean M. HanniS Treasurer Pedent, Human Resources Charles W. Mueller ' James C. Thompson President, Chief Executive Officer and R AI n KelleY Secretary Vice President, Energy Supply Chairman of the Board- Ameren AmerenUE Michael J. Montana Corporation Vice President, Supply Services Robert H. Quenon Charles ). Schukai Senior Vice President, Customer Services Craig D. Nelson Retired Chairman of the Board - Vice President, Merger Coordination Peabody Holding Company inc Wslliam J. Cart Mce President, Customer Services - Harvey Saligman ' Samuei E. Willis Vice President, Industrial Relations Retired Managing Partner - Cynwyd Regional investments, a real estate partnership Garry L Randolph Ronald C. Zdellar Mce President Nuclear Operations Vice President Customer Services - Charles J. Schuka? ' Division Support Senior Vice President Customer Services - Robert J. Schukai AmerenUE Vce President, Power Plants Ameren Energy Janet McAfee Weakley ' ' William C. Shores President - Janet McAfee, Inc., a Vice President, Customer Services - Shannon B. Burchett residentialrealestate company Metropolitan President James W. Wogsland 8 Retired Vice Chairman - Caterpillar Inc. AmerenCIVS BOARD OF DIRECTORS 1 Member of Executwe Committee Gary L Rainwater President and Chief Execu% officer Ameren Corporation Wilham A. Koertner Advisors to the Board William E. Cornelius ' Vice President. Finance & Administration Retired Chairman and Ch%f Executive Charles Dougherty and Secretary Officer - Union Electric Company Retired Chairman and Chief Executive ! Officer - Union Electric Company James T. Birkett Clifford L Greenwalt ' Vice President, Power Operations Retired President and Chief Executive Thomas Jacobsen Officer - CIPSCO Incorporated Chairman, President and Chief Executik Gilbert W. Moorman Officer - Mercantile Bancorporation Inc., Vice President Regional Operations Thomas A. Hays ' a bank holding company D. Robert Patterson Retire 0' Deputy Chairman - Mce President RegionalOperations The May Department Stores Company Richard A. Liddy 2 Chairman, President and Chief Executin Officer - General American Life Insurance Company a provider ofinsurance products and services Gordon R. Lohman ' President and Chief Executie Officer - AMSTED Industries, a diversified manufacturer of industrialproducts ! i N
nuestor n'Ormation , Commot' Stock and Dividend information Annual Meeting Direct Deposit of Dividends Ameren's common stock is listed on the New York Stock The annual meeting of All registmd Ameren Euhange (ricker symboh AE'7. AEE bepn trading on January 2, Ameren common stockholders common and Union Electric and 1998, folkming the merger on December 31, P97, and is being and Union Electric and CIPS preferred stockholders can ismed in exchange for Union Electric and CIPSCO Incorpouted CIPS preferred stockholders have their cash dividends auto-common stock will convene at 9 a.m., matically credited to their bank Common stod holders of record totaled 102,710 and 37,777 Tuesday, April 28,1998, at accounts. This service gives for Union Electric (UEP) and CIPSCO Incorporated (CIP), Powell Symphony I f all, stockholders immediate access to
, respectively at December 31,1997. The folkming includes the V priw ranges and dividends paid per common share for UEP and 718 North Grand Boulevard, their dividend on the dividend [...
St. Louis, Missouri. payment date and eliminates the CIP during the past two years: possibility oflost or stolen divi-DRPlus dend checks.
, UEP Through DRPlus -
7 Ameren's Web Site Ameren's dividend reinvestment ' Quarter Ended High low Dividends Paid and stock purchase plan - To obtain AEE's daily stock March 31 $39% $36% 63%( stockholders, customers and price, recent fmancial statistics June 30 37' 34% 63% employees of Ameren and its and other information about September 30 36 63 { subsidiaries un: the company, visit Ameren's 38%~
- make cash investments by home page on the internet.
December 31 43% 35% ~~~ 63% check or automatic cash Ameren's web site address is: 1996 p.iyment, totaling up to http://www.ameren.com Quarter Ended High Low Dividends Paid $120,000,in Ameren 62gg common stock annually investor Services March 31 $44% $38%, June 30 41% 38% 62% = reinvest their dividends in ' '
- P'"I ' ""** *'
Services representatives are September 30 40% 36 02% Amcren common stock - ,,; g or rnenve Ameren dividends december 31 40% 36% 63%- business day from 7:30 a.m. m cash . to 4:30 p.m. (central time). CIP
- place Ameren c mm n stock Please write or call:
certificates in safekeepinn and receive regular account Ameren Services Company Quarter Ended High low Dividends Pd statemems. Investor Services Department March 31 537 $34% 52c PO. Box 66887 If you have not yet June 30 36% t. ouis, MO 63166-6887 l 33% 53- exchanged your Union FJectric l September 30 38 % 36 53 or CIPSCO common stock St. Louis area 554-3502
, December 31 45 36% 53 certificates for Ameren Toll-free 1-800-255-2237 common stock certificates, 1996 please contact the Investor Office
- , Quarter Ended High low Davidends Paid Servias Department- One Ameren Plaza March 31 $41% $37% __ 518 This is not an offer to sell, or 1901 Clmuteau Avenue June 30 38% 35% 52 a solicitation of an offer to buy, St. Iouis, MO 63103 September 30 38% 34% 52 any securities. 314-621-3222 December 31 38% 34 % 52_ 5tock and First Mortgage Bond Transfer Agent and Registrar Amerci Services Company
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4 Ameren PO. Box 66149 St. Louis, Missouri 6M66 ft. WAmereti s 0 e _ _ _ . . . . . . _ . __}}