Text

1998 Annual Rept for Ameren Corp/Union Electric Co. with
	ML20204G678
Person / Time
Site:	Callaway
Issue date:	12/31/1998
From:	Mueller C, Passwater A; UNION ELECTRIC CO.
To:	; NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
	ULNRC-03990, ULNRC-3990, NUDOCS 9903260232
	Download: ML20204G678 (51)
	v • d • e

.. . .

s L. Union EIxctric one Ameren Ylaza

,- 1901 Chouteau Avenue PO Box 66149 St. louis, MO 63166-0149 314.621.3222 March 19,1999 U. S. Nuclear Regulatory Commission Attn: Document Control Desk gf4 Mail Station PI-137 g Washington, D.C. 20555-0001

[ Gentlemen: ULNRC-03990 DOCKET NUMBER 50-483 CALLAWAY PLANT UNION ELECTRIC COMPANY ANNUAL FINANCIAL REPORT Transmitted herewith are tw[nty-five (25) copies of the Ameren Corporation / Union Electric Company 1998 Annual Report. This information is submitted in accordance with 10CFR50.7)(b).

Very truly yours, w ~

Alan C. Passwater Manager, Corporate Nuclear Services DES /mlo Attachment gij d I

jM aggg gagg 3 u so a subsidiary et Amoren Corporation

e o 6 n

t s

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 Mr. Mel Gray (2)

Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Comaission 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 L

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m Our Strategy for N Future l

Capitalize on our generating assets; grow earnings through core i ==

Susiness development, selective investment in new products, technology and energy-related ventures, aggressive cost control; and effectively manage regulatory and market uncertainties.

m Strong fundamentals '

Build on financial strength - Ameren's balance sheet and cash flow are strong. We have a low cost structure. We have credit ratings that Open this flap r are among the industry's highest.

and see what's '

inside Ameren Capitalize upon robust generatior, and transmission systems. -

Expand on solid customer loyalty reflected in surveys repreconting opinions of our 1.8 million customers.

Continue a 96-year record for superior reliabil;ty and top-quality customer service.

Develop already skilled employees who are striving to ensure _ _ . . .

our success.

m Effective Solutions -

Maximize generating assets and develop Ameren's energy marketing and trading affiliate - AmerenEnergy, Inc.

Increase revenues / earnings through non-regulated business

, ; initiatives. These include a growing portfolio of attractive, energy-relateo products.

l Continue to aggressively reduce costs through lower production / fuel l costs, increased operating efficiency, improved productivity and the innovative use of technology.

I Effectively manage market uncertainties through active pursuit of _

alternatives to stringent, costly regulations and by pressing for a _

thoughtful, carefully planned transition to a fully competitive envircnment.

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Consolidating Bills

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Kirbn's Cards retently opened a id, .,. . . . . . - .

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i store in suburlun St. Inuis. It shares t .; . ' . .

i one problem with other Kirlin ,

p~

) e stores: the headache of paying mul-a pf" !

tiple utility hills. In lw8. through a "

, i pilot progr;un. Ameren offered this lukstore Quincv, Ill.-lused (hain rebet called Ameren Abillity, this bill consolidation senice has han-l died payment pn> cessing for dozens Marketing Energy Managing Energy Use of utihty hills- ILised in downtown 5t. Inuis, through Ameren Abacus ,

Ameren's independent energy nur-2 Washington l'niversity in St. Inuis, l y- '

keting and trading affilute has spanning 228 acres and educating '

assembled a seasoned5 ,roup of 11,6o students, now joins the auto- 1 * .

m >re than % professionals. The mouve industry and other i ,

AmerenEnergy team offers a range unnersities in relying on Ameren

g. - pp,

.. . .,. f'" of experience twith in the physical Abacus to monitor its energy use. f ,e ~ " ~

trading of energy and in structunng The unnersity can track energy 4 1 p' '

energy solutions to meet indnidual con 3umption by building, depan- - -

husiness needs.

ment or dormitory through this ,

d wireless energy nunagement tool.

Ameren Abacus is tracking energy consumption at facihties near the unicersity's historic 1Llltop Campus and acrov its Washington l'nnersity I Nhool of Medicine complex.

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ci the past year, we h.ive followed a well-defined strategy -

to capitalize on our generating avets. grow earnings, reduce costs and l

cffectively nunage regulatory and nurket uncenainties. We hae enhanced the i perfornunce of our existing assets and nude necewary imestments to prepare l for an increasingly competitive environment That strategy has proved both i2. l durable and successful.

l We continue to seek opponunities to maximize our generating assets.

l Ameren ranks lith in the nanon in generation capacity.19u8 was marked by several initiatives to secure and enhaate this position by increasing the avail.

abihty of our coal-fired plants and sustaining the already strong performance of our nuclear unit. Our I.ahadie and Rush Island plants set all-ume generation records in 1998, while our Callanay Nuclear Plant needed only 31 days to com-plete its ninth refuehng tying the record set dunng the planti last refueling in l

the fall of 1996 Thi, record was the second shonest of any of the 2~ nuclear j plant refuchngs conducted in the spnng of 1908 Callaway conunues to rank as one of the nation's best managed nuclear plants, earning recognition for operat-ing efficiency and safety in a period of increased regulatory scrunny These generation resources paid dividends in the sununer of 1998 when unlities were paying unprecedented prices for power purchases. We effectively l managed power costs m the face of soaring wholesale electricity prices. and I

these abnornully high prices had I,ule impact on Ameren's financial results, unhke the experience of seseral other utihties.

The year also nurked funher development of our energy trading and >

marketing affiliate. AmerenEnergy is now poised to tapitalize on Ameren's l strong generation assets. Iinally, in 1998 we signed contracts that set the stage for the insullation of combustion turbines that, by the year 2001, will add more .

than ~00 megawatts to our generating capacity.

j We continue to grow earnings through core business deselopment and

~

! imestment in new pnxtucts and energy-related ventures. We are developing a f stream of attractive pn> ducts and services that uill benefit our customers and

! enhance our company's carnings growth. These include a number of tet hnolog-ically sophisticated pntlucts, from an autonuted hill consolidation senice -

Ameren Abilhty - to an energy management pnnluct - Ameren Abacus -

that allow s business or institutional customers to track energy use by pnicess, building or facihty-Another of Ameren's major ventures involves pannerships with design and engineenng firms. Foremost among these is Gateway Energy Mstems. a I

( firm that designs, builds, finances, owns and operates utility systems for large l institutional and industrial customers. In 1998 Gateway Energy sealed a lu-year j contract to build a $20 million steara facihty for a fortune W company.

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1 STRONG FUNDAMENTAL $

EFFECTlVE SOLUTlONS l

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]*] ~ Gaining a Large Customer l When Olin Corporation shopped

! for providers through a retail pilot i

program offering choice to a select number of Illinois Power cus-tomers, AmerenCIPS won the com-W! n et I h . t i t u p o '. l u " ,

petitise bid. AmerenCIPS is sersing A N o < a " ,f t il Olin Corporation's East Alton, Ill.,

I r u ri;y ( :< >r1y n my7 complex. East Alton is headquar-ters for two of the company's c a t , c q t;.,,p.,~,

. ,,porat

.. operation groups-Winchester

.y- eoi ;m n ng sts Division and Olin tirass. The j f nun inq m,. o r f u n anc .. . J INMcre complex includes a

. . , e H a v,. Pc L,h, c or n ny casting plant. brass mill, fabricauon c m ' "."' " e 9 ,l .'s Providing Reliable Power e plant and waste water facility and At Emerson Electn,e

% pen et,nq ad an'"1

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the nunufacturing facihty for Olin's AmerenUE was selected in a com-e %oy, I nto,.nq an ,nq Winchester Division.

petitive hidding process against

%.n % ekets Domh,pmq - . .m other experiented firms to design ~~

- im wx and sew os mat # ,

M I and build a substation for Emerson

, oad n >,un, ano att,ag new Electric Co.'s World lleadquarters.

> his q . ton g Canaah m q on .gg y,y;; . w 11 provide a high m, vee , a 1"' N d '""

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level of rAhility br Emerson's

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,mpo,,eos d'%n < divisior- = . I.ouis site. *'

.o . , mr>ionny an of th"+

Emerso 126th among Fonune W cunp>

nies. Through more than 60 divi-perations rank

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sions, Emerson produces electronic, .

electrical and related pnxlucts and systems for industrial. commercial g .1 l

and consumer markets worldwide. '

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operating costs. In 1918 we eliminated more thar ano positions, essentially with- ,

out layoffs. through a hiring freeze and a targeted separation plan. These reduc-tions will yield savings of approximately $20 million to $25 million annually.

~

Ameren's entire work force now stands at approumately 7,-650 employ-ces - the level of employment for l'nion Electric alone in 198 Compared to Jecade ago. Ame.en companies are serving 8% more customers - with 26 l

tewer employees. In 1998, l'uhlic Fttlity Fortnightly, a leadmg industry publica-tion, recognized Ameren as one of the nation s most efficient utihties ranking orr company as the second most improved" and iIth most efficient.

) We will continue to improve our efficiency as we refine our strategies and determine the skills that are most important in meeting the challenges of a competitive envimnment.

I j Finally, we are effectively managing the market and regulatory uncenain-Eornings Per 5 hare ties we fxe by reinaining visible and active in the industry restructunng debate and on other issues. We have continually communicated to a range of govern-g ment officials that we cannot support initiatives aimed at increasing competition in ways that do not adequately protect our shareholders and our customers On the environmental front, we are using our resources to propose alter- I natives to the several stringent, techmcally flawed regulations that federal envi-ronmental officials proposed and established in 1998 We continue to research.

4. ; invesugate and test technologies that offer workable and affordable alternatives.

l Going forward, our strategy's operating model will increasingly he based

! on a business line approacF. These business lines include generation; energy

, transmission and distribution; retail customer service; business and corporate services; and non-regulated operations.13usiness hne teams spent 1998 planning and developing strategies that will yield added resenue and cost savings.

These efforts will keep our management and employees focused on the specific strategies that bring bottom line results in an ever-changing competitive environment. As we mark the completion of our first full year as Ameren

~

l Corporation, we ca;i tell you that our strategy has brought results.

) 1998 Fisonciel Perf ormente in 1908, our company camed $.% million, 7 J or $2 82 per share. This compares to 1997 earnings of $335 milhon. or $2.44 .

Excludmg an extraordmary charge of $ 38. bCI h I O UN O O IOUI 03II C INN' I INC M' l net of income taxes, reduced 1997 earnings 38 cents per share. Excluding non-recurring charges, ongoing earnings for 1998 were $2.93 per share, compared 1

to $2.7~' per share for 1997.

l j Electric revenues were up slightly in 1998 over 1997. despite rate decreases

! and a $13 milhon credit to Missouri electric customers. These reduced earnings 6 cents and 18 cents per share, respectively. Kilowatthour sales to retail customers within our senice territory were up w. Our annual sales growth - in a now-expanded. economically strong senice area - stands at better than 2%

i 1

d 8 Service Aree Kilowattliour Sales In 8silions 45 1

~1 i

i i -

i

, Electric Industry Restructurlag is Illinols Anwren mntinued todesclop rechnology, organize staffs and contribute to working groups the sute created ji4 to respond to the multiple requirements of 1997 legislation setting the suge for provider choice. Cenain large conunercial and industnal customers in Illinois 4'i 1 can choose their energy providers in late 19W, with all business and residential customers able to choose providers by May 2001 The law also called for a %

rate reduction that Irgan Aug.1, IWH. for our Illinois residential customers. j

! That rate decrease is expected to reduce future annual revenues by approxi- l t

nutely $1i milhon ($8 million over 1998L l Electric industry Restructuring in Missourl .\hssourilegislators and .

'5 regulators continue to analyze the issue of provider choice. As members of vari- ,

s

^

ous restructuring task forces and committees, Ameren's managers continue to ,

% 9/ 98 he very active in promoting the interests of its investors and customers. l l In $eamary Ameren Onjuration is a stronger and more focused mmp ny l than ever lefore. We are confklent tlut our operating perfornunce, growth initiatiu s j and strategic diretnin uill nuke Ameren a success in any competiuve environment.

l We are investing in the people, technology and facilities that suppon our core energy business. Through our merger and direct sales initiatives, we are !

expanding our nurket area and customer tuse. We continue to develop prul- l ucts that retain and attract custon.ers, as we selectively pursue non-regulated business opportunities While we do not underestimate the challenges, we enter the new era committed to returning value to you, our shareholders.

I Going forward, we are enthusiastic about the opportunities that are open to a financially strong company, hke ours. We realize that you will be best ser ed by a company that can maintain its low-cost advantage, meet customers' I l total energy needs and dehver superior earnings growth.

Our thanks go to our employees and to our dedicated directors uho l have leen artisely involved in charting our course.

Sincerely, I

r

{

l Charles W. Mueller Chairman, President and Chief Executise aGeer Fehnury 10.1999

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Making auto seating and door tnm for residents across multiple states requires Toyota trucks may seem a highly spe- l an investment in generation and trans-r cialized small enterprise, but moving this mission facilities. These investments kept industry to tiny 1.awrenceville, Ill., several plants generating at the highest represents a 512 million investment. levels this past summer when rising tem- y~

l AmerenCIPS' economic development peratures and other utilitics' energy

! efforts helped bring this industry, Trim shonages sent energy prices soaring.

Masters, Inc., to Lnvrenceville. The To further bolster generation supply, plant's AmerenCIPS-designed and Ameren committed in 1998 to purchase installed distribution facilities are expect- six combustion turbines - primarily

), , ed to attract other industrial customers to fueled by natural gas. They are slated to I

5 i this growing area. be in operation in 2000 and Mll.

With headquarters in llarrodsburg. Ky., adding more than 700 megawatts to our i the maker of seating and do(n panel system's more than 11,000 megawatts of I

! systems was created in 1987 as a joint total capacity.

l venture between Johnson Controls. On the transmission side of our energy Araco and Toys ta Tsusho America, Inc. delivery system, in 1998 we fulfilled a in Slissouri, you'll find yet another regulatory condition for merger approval major distribution services customer - by joining 9 other utihty companies to Emerson Electric Cofs World lleatk uaners. l form the Midwest independent System in 1998, Emerson selected Amerent.'E in Operator (Midwest 150L Ameren nun-

. a competitive bidding process ta design agement played a major role in shaping l and build an electrical substation, replac- the rules for the Midwest 150. In the

, ing decades-old equipment.

This new equipment will ensure a high level of power reliability for several Emerson division 3 kicated at the M

I Ferguson, Mo., site.

I' Keeping the electrons moving to industrial and commercial enterprises and I

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1 summer of IW8, the Federal Energy to expect their power to be restored -

Regulatory Commission conditionally a senice that willle systemwide in IW).

approved the entity, w hich will operate, To help customer contact staffs antici-but not own, transmission systems. On l pate and respond to senice and pn> duct an hour-by-hour basis, the Alidwest ISO needs, Ameren is creating a new state-

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would play traffic cop for buyers and of-the-art customer information system.

(a) 8 sellers using our transmission system. It can handle complex billing arrange-Expected to be in operation by the year ments and provide comprehensive 2001, the Midwest 150 covers H states customer infornution.

f and represents ponions of 40,tkio miles Finally, efficient natura! gas distrihu- {

of transmission line and 62,mo tion, use of financial instrumeus to megawatts of electric power. Collectively, hedge against volatile pricing and the member companies serve more than upgraded natural gas storage fields help 7 mill sn customers. ensure delivery of affordable energy to in lWH. we invests J in improvements our SKt000 natural gas customers.

l and new technology to relieve major Int- Storing natural gas in the summer, when tienecks and case the flow of power l the fuel i3 less expensive, and withdraw-l along transmission systems in Illinois. j ing it in winter, when its value is at a i

Ameren also centralized dispatching to l premium, help us reduce required I

etficiently respond to customers who face l ceserved pipeline capacity, lowering power interruptions. And to analyze j costs. Storage also helps us avoid price l

power disruption data and more efficient- j spikes and offers a reliable supply in ,

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ly dispatch crevs the company is intro- biuer winter weather, when purchased ducing sophisticated, Ameren-developed gas availability declines. ,

computer systents acnas its temtory.

AmerenU customers can get automated responses when they call to find out when

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t Ameren saves money and improves

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L service to customers with 800,000 automated electric meters now in St. Louis area homes and businesses j t

l Ameren Abillity, a central pn> cessing i

point for customers' many utility bills - .

water, sewer, waste disposal, and yes, electric and natural gas sersi e. 'the typical ,

! Ellective Solutions - Using Technology To Build Revenues i

, Ameren Abillity customer pays 80 or more

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i unlity hills for 20 or more locations.

1 Consumption and summary information m Vhat innovative technology does ,

goes to that customer via the Internet, a

'10 ; j v one of the nation's top universities and ; computer disk or a printed copy.

its renowned medical school purchase ! Through Ameren Ahi!hty, Ameren staffers from our company? Ameren Abacus. help resolve discrepancies, saving cus-Washington t'niversity in 5t. Inuis has tomers administratise time and money.

ioined industrial giants in embracing Ameren Abillity has helped businesses Ameren Abacus This wireless energy identify high-energy-use processes, facili-management tool adows customers to ; ties and time periods. Ameren Abilhty monitor energy use within each building, also helps customers compare various i

department or pn(luction process. ,

energy providers' pricing, giving businesses Ameren Abacus combines state-of-the-art l a tool for selecting power providers in meter technology with the power of the .

states where provider (hoice is available.

Intemet to help customers make informed Ameren is also using the Internet to operating decisions This product is one of l offer enhanced automated hill present-1 a number we've developed to leverage l ment and payment services to the resi-our investment in new technologies. dential customer. In 199~, AmerentlE Another is a test customers began paying their bills ,

pq product - { through seseral payment options -

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>- - . Prestigious Washington University in St. Louis relies on Ameren Abacus

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to determine how much i

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to keep labs working at its medical school or the lights on in its dorms.

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AmerenUE customers can visit our web site (http://www ameren com) to view and pay their bills electronically through the Intemet, using their pere ,,,,al computers. e pay-by-phone, pay-by-web, and direct quickly and

. payment. Now more than 40.000 cus- eliminate tomers use these senices that alk>w estimated hills -

, them to authorize automated bank to name only a few of account deductions of luth electric and the benefits.

natural gas charges. We are launching in IW8, we began installing autonuted yet another payment service. It makes Number of Electric and m, ers in rural areas. Our goal is to have 13 paving hills a speedy, paperless elec- Gas Customers Per

- mimon meters in the homes and businesses Employee at Year ind

.y' tronic round-trip process - sending a of Amerenn Missouri and Illinois electric replica of the energy hill through the .A and natural gas customers by the year 3 M M t Internet. Once the customer okays the The success of this rada-based. wireless payment, the service directly withdraws network has led Ameren to pursue a new y

the payment from the customer's chetk- business venture that would offer meter ing or savings account, while updating installation and energy information records through a knk to the customer's services.

financial software.

finally, even \meren' less high-tech Our customers have also benefited : facihties are generadng :.dded resenue.

from the expansion of Ameren's net- j in 1998, we signed joint-use agreements work of automated meters. Providing :

.. .- . with major wireless companies, granting hourly usage data, these meters are

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them access to dozens of our distribution now in mmo homes and businesses poles and transmission towers. These in the $t. Louis area. With the world's 9I 'l # phone and cable companies rent space on largest network. Ameren can provide our poles for personal communications greater information to customers on service ainennas. m energy usage, respond to outages more j, 3

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Ameren Abillity, a newly piloted bill consolidation product, allows the 100-store Kiriin's Cards chain to pay multiple utihty bills through a single service L

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Electricity is fast becoming one of the : Gateway Energy is a joint venture of I nation's largest comnnhty markets. Ameren, Environmental Management l l

l The number of independent power l Corp. and Energy Equities Lt.C.

i trading companies approved by the l Gateway Energy has several pending Federal Energy Regulatory Commission has projects, including management of an l -

grown to more than n); more than -'i ! energy center for a major office and (13 :

( l utilities have opened tradmg subsiduries, research campus.

AmerenEnergy, the corporation's In 1998, Gateway Energy began energy marketing and trading affiliate, construction of a 520 million steam uses advanced state-of-the-art technology facihty through a 20-year contract with to track the buying and selling of elec- a Fortune 5n0 company.

j tricity and natural gas and to provide f Ventures like this one, attractive pnnl-customized energy services. ucts and senices, coupled with a contin-l AmerenEnergy also has a seasoned f ued focus on cost control, will allow our i

l , orps of risk management experts. These i company to capitalize on our strong professionals are not only stnKluring prod- l [undamentals, while pursuing effective f utt.; to protect customers from volitile pric- solutions. Given these strengths, we are l

L ing, they are also working to limit Ameren's confident of our ability to manage the l

own exposure to price movements. changes that are reshaping our industry.

l Another of the corporation's major j ventures involves partnerships with major l

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l design and engineering firms. Foremost

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I i among these is Gateway Energy Systems, a firm that designs, builds, finances, owns and operates utility systems for 1

j large ira cional and industrial cus-i j tomers. We types of utilities include l

j steam, hot water, chilled water com-pressed air, water treatment and waste-water treatment.

l l

1

I Responsibility f or Financial Statements Report of Independent Accountants The management of Ameren Corporation is responsible for the To the Stodbolders and ikurd of Directors of Ameren Corporation:

infonnation and representations contained in the consolidated financial sutements and in other sections of this Annual Report In our opinion. based upon our audas and the repons of other The consolidated financial statements lute been prepared in con- auditors, the accompanyng consohdated balance sheet and the i formity with generally accepted accounting principles. Other infor- related consohdated statements of income and retained earnings I mation included in this report is consistent, w here applicable, with and of cash nows appearing on pages 23-27 of this annual report the consolidated financial statements. present fairly, in all nuterial respects, the financial position of .

The Company mainuins a system of internal accounting con- Ameren Corporation and its subsidiaries at December 31,19)8 and trols designed to pnivide reasonable assurance as to the integnty Ivr and the resuhs of their operations and their cash nows for of the hnancial records and the protection of assets Quahfied per- cath of the three years in the penod ended December 31,1998, in .

! sonnel are selected and an organization structure is maintained that conformity with generally accepted accounung pnnciples. These i provides for appropriate functional responsihihty. financial statements are the responsibility of the Company's man- ,

Written pohcies and pnicedures have been descloped and are agement; our responsihihty is to express an opinion on these revised as necessary. The Company . maintains and supports an financial statements based on our audas. We did not audit the extensive program of internal audas with appropriate management financial sutements of Central Illinois Pubhc Service Company and follow up. CIP5CO Investment Company, w holly-owned subsidiaries of The Ikurd of Directors, through its Auditing Committee com. Ameren Corporanon, for the years ended December 31,1997 and prised of outside directors. is responsible for ensunng that luth 1996 w hic h combined statements renect total asseis of j management and the independent accountants fulfill their respec- $1.x89,61.onn at December 31, ivT and total revenues of l Ine resinnubihties relative to the financial statements. Morcoser. W & ul,ono and 5891.631.nno for the two years in the period the independent auountants lure full and free access to meet with ended December 31,19T respectively. Those surements were the Audning Comnuttee, with or without management present, to authted by other audnors whose reports thereon base been fur-( nished to us, and our opinion expressed herein, insofar as it relates discuss auditing or financial reponing matters.

l to the amounts included for Central Illinois Public 5ervice i Fehnury 'i, IW9 Company and CIP5CO Im estment Company, is based solely on the repons of the other audnors. We conducted our audits of these sutements in accordance with generally accepted authting stan-dards which require that we plan and perform the audit to obtain reasonable assurance about whether the knancial statements are free of nutetul missutement. An auda includes examining. on a test basis, esidente supporting the amounts and disclosures in the financial surements assessing the accounung principles used and

j significant esumates nude by nunagement, and esaluating the l

oserall financial sutement presenunon We heliese flut our audas l

and the repons of other audnors proside a reasonable basis for the opmion expressed atxne.

I fh 0 LLf PncewaterhinuseC xipers LLP l 5t.1.( Rus, Missouri Fehnury e. lW9 s 1 i

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N 1998 Annual Report

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O C C C C o m o o t 'o Olcoccoloc cac caosyogo 0yerview taes, or 38 cents per share (see Note 2 - Regulatory Slatters under Ameren Corporation (Ameren) is a holding company regis- es to omlidated Fmancial Statements for further infomurion).

tered 'under the Public Utihty IIolding Company Act of 1935 e sign ant knw aUeng revenua, expene and cam-(PUllCA). In December 1997, Union Electric Company ings for the years ended 1)ecember 31, lWH,1997 and 1996 are (AmerenUE) and CIPSCO Incorporated (CIPSCO) combmed to " '# "8 P#N" form Ameren, with Amerent'E and CIPSCO's subsidiaries, Central Illinois Public Service Company (AmerenCIPS) and CIPSCO "" '"#

Investment Company (CIC), becoming wholly-owned subsidiaries of Ameren (the hierger). As a result of the hierger, Ameren also gg g has a 6U4 ownership interest in Electric Energy Inc. (EED, which """*"'#""

is consolidated for financial reporting purposes. In addnion. I?""_ __

E Ameren formed a new energy marketing subsidiary, Rate variations $(13) $ - $(20)

AmerenEnergy, Inc , which primarily serves as a power marketing Credit to customers (24) 28 (15) agent for the operating companies and provides a range of energy Effect of abnormal weather 61 3 (28) and risk management services to targeted customers Growth and other 45 5 67 ne Merger was accounted for as a poohng of interests; therefore, the con 3olidated financial statements are presented as if Intmhange sab b. W) M.

the Merger were consummated as of the beginning of the earliest U N 9 O period presented. Ilowever, the consolidated financial statements $ 30 $ 2 $ 53 are not necessarily indicative of the results of operations, financial posnion or cash Hows that would have occurred had the Merger Electnc revenues for 1998 increased $30 million compared to been consumnuted for the periods for which it is given effect, nor 1997. Revenues increased pnmarily due to higher sales to retail is it necessarily indicative of the future resuhs of operations, finan- customers within the Company's service terntory, as a result of cial position or cash Dows. warm summer weather and economic growth in the ervice area.

References to the Company are to Ameren on a consolidated Weather-sensitive residential and commercial sales increased 6%

basis; however, in certain circumstances, the subsidiaries are sepa. and 4%, respectively, while industrial sales grew ?% Additionally, rately referred to in order to distinguish between their different interchange revenues increased 7%, despite a la decline in inter-business actwities. change sales, due to market condaions. These increases were par-tiall" offset by an increase in credas to Missouri electric customers Resells of Operallons (set Note 2 - Regulatory Matters under Notes to Cortsolidated E.""""#

Financial Statements for funher information) and lower sales to the Earnings for 1998,1997 and 1996, were $386 million ($2.H2 United States Enrichment Corporation (USEC) by eel.

per share), $335 milhon ($2.44 per share) and $372 million ($2.71 Electric revenues for 1997 were flat compared to 1996, reDect-tng a decrease in the Missoun electric customer credas recorded m per share), respectively Earnings and earnings per share Ductuat-ed due to many condaions, pnmanly: weather variations, electric IW M y of k a N &- n Ubwdour rate reductions, competitive market forces, credas to electric cus-ul %e bbdour a de a was due to a 13% decrease n interchange sales due to market condaions, a 1% dechne in res-tomers, sales growth, fluctuating operating costs (includmg Callaway Nuclear Plant refueling outages), merger-related expens- idential sales and differences in the classification of ceruin inter-change and purchased power transactions, resuhing from the es, changes m interest expense, dunges in income and property taxes, a charge for a targeted employee separation plan and an MM R ComMim (FERC) Order HH8. These extraordinary charge. decreases were partly offset by increases in commercial and indus-in 19m. the Company recorded a nonrecurring charge to earn-trial sales of 1% and 24, respectively, attributable to economic ings in connection wah a targeted separation plan it offered to growth. In addition, sales at EEI were up 6% over 19(Xt employees in July 1998. The charge ceduced earnings $15 milhon, The increase in 19% electric resenues was primarily due to a net of income taxes, or 11 cents per share (see Note 3 - Targeted 5% increase in kilowatthour sales over the prior year, partly offset

. Separation Plan under Notes to Consolidated Financial Statements by the IRW rate decrease for Missouri electric customers and the net increase in Ah.ssoun electric customer credas recorded in 1996 for further infonnation). In addaion, the C.ompany recor&d an extraordinary charge to earmngs in the fourth quaner of 1997 for versus 1995. The kilowarthour sales increase renected economic the wnte-off of generation-related regulatory assets and liabilities of growth in the service area and increased interchange sales oppor-the Company's Ilhnois retail electric business as a result of electnc tunities, panially offset by milder weather during the period.

industry restructuring legislation enacted in llhnois in December Residential and industrial sales each rose 2% over 1995, while com-1997. The write-off reduced earnings $52 million, net of income rnercial sales grew 3% and interchange sales increased 3?%

-~

Amoren Corporation M s - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ J

Gas costs in 1998 declined $42 million compared to 1997.

fuel and Putthosed Power This decrease in gas costs was due to lower sales and lower gas rarmtom/mm mr rear In ettua 19w 1997 19w prices. Gas costs for 1997 remained flat as compared to those of

~

1996. The $35 million increase in 1996 gas costs was primarily the Fueh result of a combination of increased demand, due to colder weath-Variation in generation $9 $ 25 $ 43 er, and an increase in the price naid for gas in 1996 versus 1995 Price (23) (24) (14)

Generation efficiencies and other -

(5) 2 other Operatirty Erpenses Purchased power variation (3) (50) 2 Other operating expense variations in 1996 through 1998 10 reflected recurring factors such as growth, inflation, labor and ben- .

EEI (39) 23 efit increases in addition to a charge for the targeted separation

$(56) $(44) $ 56 plan (TSP) as discussed below.

In March 1998, the Company announced plans to reduce its .

The $56 million decrease in fuel and purchased power costs ther operating expenses, including plans to eliminate approxi-for 1998, compared to 1997, was primarih driven by lower fuel m tely 400 employee positions by mid-1999 through a hiring and purchased power costs at EE! as a result of fewer sales to the freer and the TSP. In July 1998, the Company offered separation USEC. In addition, fuel cost reductions were realized due to lower p ckages to employees whose positions were to be eliminated fuel prices, as well as through the joint dispatch of generation.

through the TSP. During the third quarter of 1998, a nonrecurring, Upon consummation of the Merger, AmerenUE and ArnesenCIPS pre-tax charge of $25 million was recorded, which reduced earn-began jointly dtspatching generation, therefore auewing the ings $15 miUion, or 11 cents per share, representing costs incurred Company to utilize the most cost efficient plants of both operating t implement the TSP. The elimination of these positions, exclu-companies to serve customers in either service territory. These sive of the nonrecurring charge, reduced the company's operating decreases were partially offset by increased generation to serve expenses by approximately $15 million in 1998, and the Company native load demand. The decrease in 1997 fuel and purchased expects perating expenses to be reduced approximately $20 mil-power costs was primarily due to reduced purchased power costs, li n t $25 million annually thereafter. See Note 3 - Targeted resulting from relatively flat native laad sales and lower inter-Separati n Plan under Notes to Consolidated Financial Statements change sales, as well as lower fuel prices, offset by greater gener-for funher information.

ation. The increase in 1996 fuel aad purchased power costs was The $62 million increase in other operations expense in 1998, driven mainly by higher kilowatthour sak partiauy offset by c mpared to 1997, was primarily due to the charge for the EP and lower fuel prices due to the use of lower cost coal.

increases in injuries and damages expense and information system-While unprecedented pnces fer power purchases occurred in related costs. In 1997, other operations expense increased $41 mil-the marketplace during the last ,veek of June 1998, the Company lim reunarily due to increases in information system-related costs, was able to effectively manage its power costs in the face of soar-iah r, and injuries and damages expenses In 1996, other operations ing wholesale electricity prices. Overall, the abnormally high expense increased $2 million, primarily due to increases in employ-prices for power purchases in June had little impact on the ee benefits, injuries and damages, and information system-reba <

Companyk financial results for 1998.

costs, offset by decreases resulting from nonrecurring costs incurn A in 1995, including the write-off of system development costs.

& O pi n in Maintenance expenses increased $2 million in 1998, co n-Gas revenues in 1998 decreased $33 million, compared to pared to 1997, due to the scheduled spring refueling outage at the 1997, primarily due to an 8% decline in retail sales resulting from Callaway Nuclear Plant, partially Cset by less scheduled fossil mild winta weather and Irwer gas costs reflected in the pl nt m inten nce. The spring 1998 refueling was completed in Company's purchased gas adjustment clauses. These decreases 31 Uiys. There was no refuelmg outage in 1997. Maintenance weie pantally offset by benefits realized from an annual $12 mil expenses for 1997 increased $8 million primarily resulting from lion Missouri gas rate increase effective February 1998 bee Note 2 -

increased scheduled fossil plant maintenance, panly offset by

- Regulatory Matters under Notes to Consolidated Financial decreased expenses at Callaway due to the absence of a refueling Statements for further information). Gas ;evenues in 1997 utage in 1997. In 1996, maintenance expenses decreased $5 mil-decreased $4 million, primarily due to a 12% cacease a retail li n primarily due t less scheduled power plant maintenance, -

sales. Milder winter reather resuhed in a d-cthe w we4her-sen-p rtly offset by increased labor expenses at Callaway, sitive residential and commercial saks cf % nd 18%, respec-Depreciation and amortization expense was relatively flat in tively. These dxteases were panly offsa by a 20% increase in 1998 c mpared to 1997. Depreciation and amortization expense industrial sales and an incmase in off system sales of gas to others.

increased $7 million in 1997 and $12 miUion in 1996, due to The increase in 1996 gas revenues of $37 million was primarily the incre sed id miaNe pmpg resuh of higher gas prices and increased sales due to colder weath-er Residential and commercial sales increased 13% and 17%,

respectively, in 1996 versus 1995.

M 1998 Annual Repc,rt

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[ 72aes include capital expenditures for the purchase of six new combus-Ina>me tax exnense from operation 3 increased $33 million in tion tubines (cts), as well as expenditures which will be incurred 1998, comparnf to IW7, due to higher pre-tax income and a higher by the Companv to meet new air quality standards for ozone and l effective tax rate. Income tax expense from operations decreased particulate tr , as discussed below.

i $19 million in 1997 principally due in lower pre-tax income and a in 1998, tne Company committC to purchase six new CT lower effective tax rate. Income tax expense from operations peaking units. The cts will add over 700 megawatts to the decreasa! $8 million in 1996 principally due to lower pre-tax income. Company's net peaking capacity and are expected to cost approx.

inutely $260 million. Three of the cts are expected to be installed OtherIncome and Dechections in 2000, and the remaining three in 2001.

Miscellaneous, net decreased $8 million for 1998, compared to Under Title IV of the Clean Air Act Amendments of 1990, the 1997, due to increased interest income and gains on the sale of Company is required ta significantly reduce total annual sulfur property. Miscellaneous, net decreased $11 million for 1997, com- dioxide (SOD and mtrogen oxide (NOx) emission 3 by the year

. pared to 1996, primarily due to the capitalization of certain merg- 2000.13y switching to low-sulfur coal, early banking of emissions er-related costs in 1997 (see Note 2 - Regulatory Maners under credits and installing low NOx burner technology, the majority of Notes to Consolidated Financial Statements for further intonna- these reductions have been achieved.

tion 1 Miscellaneous, net decreased $2 million for 1996 prinurily In July 1997, the United States Environmental Protection due to reduced merger-related expenses. Agency (EPA) issued fitul regulations revising the National Ambient Air Quahty Standants for ozone and particulate nutter. The new Intexst ambient standards may resuh in significant additional reductions in Interest expense decreased $4 milhon in 1998, compared to SO2 and NOx emiwions from the Company's power plants. The 1997, due to lower interest rates and a decrease in other interest new particulate rr uer standards may require SO2 reductions of up expense, partially offset by an increase in interest on a hi t to 50% bevond that already required by Phase 11 acid rain control amount of debt outstanding. Interest expense increased $5 million provisior" f the 1990 Clean Air &t Amendments and could be in 1997 primarily due to higher debt outstanding during the year required b, 2007. De full details of these requirements are under at higher interest rates. Interest expense increased $2 million for study by the Company. At this time, the Company is unable to pre-1996 primarily due to a greater amount of short-term debt out- dict the ultimate impact of these revised air quality standards on its standing, offset by lower rates on variable-rate long-term delt future financial condition, results of operations or liquidity.

In an attempt to lower ozone levels across the canrn United Balance Sheet States, the EPA issued final regulations in September 1998 to De $68 million decrease in ace mts rece;vable at December reduce NOx erQ ons from coal-fired boilers and other sources in 31, 1998, compared to 1997, was due t,, lower sales and revenues 22 states, inciading Missouri and i'linois (where all of the in November and early December 1998, compared to die same 1997 Company's coal-fired power plant boilea are locatedL Ahnough time period, due to mild winter weather. The Company's service ter- reduction requirements in NOx emissiou from the Company';.

ritory experienced much mlder weather in the latter part of coal-fired boilers are anticipated to exceed "5% from 1990 levels December 1998, resulting in higher sales and revenues at dut time by the year 2003, it is not yet possible to determine the exact mag-compared to the same 1997 period. His increase in ules caused a nitude of the reductions required from the Company's power

$18 milhon increax in unbillui revenues. The $48 million increase plants because each state has up to one year to develop a plan to in other current liabilities was pnmarily due to a higher estimated comply with the EPA rule. We NOx emissions reductions already accrued customer credit (see Note 2 - Regulatory Matters under achieved on several of the Company's coal-fired power plants will Notes to Consolidated Financial Statements for further information). help to reduce the costs of compliarre with this regulation.

liowever, preliminary analysis of the regulations indicate dut liqolditv ond Cepitof Resoarces selective catalytic reduction technology will be required for some Cash p ovided by operating activities totaled $803 million for of the Company's units. as well as other additional controls.

1998, compared to $708 million for 1997 and $782 million for 1996. Currently, the Company estimates that its additional capital Cash flows used in investing activities totaled $323 million, expend .es to comply with the EPA'r final regulations, issued in

$387 milhon and $481 million, for the years enJed Ikcember 31, September 1998, could range from $250 million to $350 million 1998,1097 and 1996, respectively. Expenditures in 1998 for con- ver the period fwm 1999 to 2002. Associated operations and stmcting new or improving existing facilities and purchasing rail maintenance expenditures could increase $10 million to $15 mil-cars were $325 million. In addition, the Company spent $20 mil- lion annually, beginning in 2003. TF Company will expkre alter-tion to acquire nuclear fuel. natives to comply with these new regulations in order to ninimize, Capital expenditures are expected to approximate $495 mil- to the extent possible, its capital costs and operating exper 4es. The lion in 1999 For the five-year period 1999 through 2003, con- Company is uruble to predia the ultimate in.gact of mese standards struction expenditures are estimated at $2A billion This est mate on its future financial condition, resuhs of operations or liquidity.

l I

I I

1 Amoren Corporation U

In November 1998, the t'nited States signed an agreement with Divideads numerous other countries (the Kyoto PmtocoD containmg certain Common Mock dividends paid in 1998 resuhed in a payout environmental provisions, whkh ,vould require decreases in green-rate of 90% of the Company's net income. Dividends paid to con.-

house gases in an effort to address theglobal warrr ing' issue. The mon stockholders in relation to net cash provided by operating Kyoto Protocol must be ratified by the United States Senate before MWb h h od w M ,

provisions are effecuve for the United states. Until ratification is The Board of Directors does not set specific targets or payout obtained, the Q>mpany is unable to predict what requirements, tf '

parameters for dividend payments; however, the lloard considers any, will be adopted in this country; however, implementauon of - wous issues including the Company's historic eamings and cash the Kyoto Promcol m its present form would likely result in sigmf-flow; projeded earnings, cash flow and potential cash flow ~

icantly higher capital costs and operations and maintenance requirements; dividend , ayout rates at other utilities; return on expenses ay the Company. At this time, the Company is unable t investments with similar risk characteristics; and overall business determine the impact of these proposals on the Company's future considerations. On February 12, 1999, the Ameren floard of

financial condition, results of operations or hquidity Directors declared a quarterly common stock dividend of 63.5 See Note 13 - Callaway Nuclear Plant under Notes to g. g gg g g Consolidated Financial Statements for a discussion of Callaway Plant decommissioning costs. g,,, g ,,g,,,

Cash flows used in financing activities were 5416 million for 1998, compared to $302 milhon for 1997 and $296 million for 1996. See Note 2 - Regulatory Matters under Notes to Consolidated The Company's principal financing activities during 1998 included Financial Statements for a discussion of rate netters the issuance of $255 million of long-term debt, the redemption of

$273 milhon of long-term debt and the payment of dividends, lleciric Indastry Restructaring The Company plans to continue utilizing shon-term debt to Changes enacted and being considered at the federal and support nornul operations and other temporary requireraents. state levels continue to change the structure of the electric indus-The Company and its subsidiaries are authorized by the Securities try and utility regulation, as well as encourage increased competi-and Exchange Commission (SEC) to have up to an aggregate 51.6 uon. At the federal level, the Energy Policy Act of 1992 reduced bilhen of short term unsemred debt instruments outstanding at various restrictions on the operation and ownership of indepen-any one time. Short-term borrowings consist of bank k>ans (matu- dent power pnxtucers and gave the fERC the authority to order rities generally on an ovemight basis) and commercial paper electric utilities to provide transmission access to third parties.

(maturities generally within 10 to 45 days). At December 31,1998, in April 1996, the FERC issued Onler 888 and Order 889, the Company had committed bank lines of credit aggregatin, 5217 which are intended to promote competition in the wholesale elec-million, all of which was unused and $170 million ww available at tric market. The FERC requires transmission-owning public utilities, such date, which make available interim financing at various rates such as AmerenUE and AmerenCIPS, to provide transmission acass of interest based on liBOR, the bank certificate of deposit rate or and senice to others in a manner similar and comparable to that !

other options. The lines of cred,t are renewable annually at vari- which the utilities have by virtue ciownership. Order 888 requires ous dates throughout the year. The Company had $59 million of that a single tariff be used by the utility in providing transmission short-term borrowings at year-end. senice. Order 888 also provides for the recovery of stranded costs, !

The Company has a bank credit agreement due 2003, which under certain conditions, related to the wholesale business.

permits the borrowing of up to $200 million on a long-term basi.s. Order 889 estabbshed the standanis of conduct and informa-This credit agreement is as ailable for the Company's own use and tion requirements that transmission owners must adhere to in !

for the use of its subsidiaries. There was $10 million outstanding doing business under the open access rule. Under Order 889, util-undei this agreement as of December 31, 1998. AmerenUE also ities must obtain transmission senice for their ewn use in the same has a bank creda agreement due 2000, which permit 3 the borrow- manner their customers will obtain service, thus mitigating market j ing of up to $300 million on a long-term basis, all of which was txw through control of transm.ssion facilities. In addition, under ,

unused and available at December 31,1998. Order 889, utilities must separate their merchant fonction (buying Additionally, %erenUE has a kase agreement which provides and selling wholesale power) from their transmission and reliabil- d for the financing of nuclear fuel. At December 31,1998, the nuxi- ity functions.

mum amount that could be financed under the agreement was $120 The Company believes that Order 888 and Order 889, which million. Cash used in Enancing for 1998 incluoed redemptions relate to its wholesale business. will not have a material adserse under the lease for nuclear fuel of $68 million, offset in part by $16 effect on its financial cond tion, results of operations or liquidity. i million of issuances. At December 31,1998, $67 million was In 1998, Amereris operating subsidiaries joined a group of l finanad under the lease. Sce Note 5 - Nuclear Fuel Irase under nine other utility companies which support the formation of the l Notes to Consolidated Financial Statements for further information. Midwest independent System Operator (Midwest ISO). An ISO j i

18 1998 Annual Report !

L

operatu, but does not own, transmission systems and maintains ommendation or approach to restructure the indus ry. In addition, system reliability and security while alleviatmg pricing issues asso- in 1998, the MoPSC staff issued a proposed plan for restruauring ciated with the** pancaking" of rates. The Midwest 60 would be Missouri's electric industry. The staffs plan addressed a number of regulated by FERC. The FERC coriditionally approved the forma- issues of concern if the industry is restructured in Missouri. It also tion of the Midwest 150 in Septemter 1998, and it is ee.pected to induded a proposal for less than full recovery of strandable costs.

be operational by the year 2001. AmerenUE's membership in the The staffs plan has not been addressed by the MoPSC. A joint leg-Midwest ISO must he approved by the Missouri Public Service istive committee is also conducting hearings on these issues The l

Commission (MoPSC). The Midwest 150 covers eight states and Company is unable to predict the timing or ultinute outcome of represents portions of 40,000 miles of tran3 mission line and 62.000 electric industry restructuring in the state of Missouri.

megawatts of electric power. Collectively, the member companies In summary, the potential negative consequences associated sene more than seven million customers. with electric industry restruauring wuld be significant and could i in addition, certain states are considering proposals or have include the impairment and writedown of certain assets, including

- adopted legislation that will promote competition at the retail levet generation-related plant and net regulatory assets. lower revenues, In December 1997, the Governor of Illinois signed the Electric reduced profit margins and increased costs of capital and opera- ,

Senice Customer Choice and Rate Relief Law of 1997 ttSe Law) tions expense. The Company is actively taking steps to mitigate l providing for elecuic utility restructuring in Illinois. This legislation these negative consequences. Most importantly, the company will introduces competition into the supply of electric energy in Illinois. continue to focus on cost control to ensure that it maintains a com-Major provisions of the law include the phasing-in through petitive cost structure. Also, in Illinois. the Company's actions 2002 of retail direct access, which allows customers to choose their include strengthening its marketing operations to maintain its cur-eledric generation supplier. In addnion, the law includes a 5% rent customers and obtain new customers, as well as enhancing it-rate decrease for residential customers, which became effecuve in infonnation systems. In Missouri, the Company is actively twolved August 1998. The decrease reduced electric revenues by approxi- in all major deliberations taking place surrounding electrk industry mately $6 million in 1998 and is expected to reduce electric rev- restructuring in an effort to ensure that restructurirf, legislation, if ene by approximately $14 million annually thereafter, based on any, contains an orderly transition and is equitable to the estinuted levels of sales and assuming nornul weather conditions. Company's shareholders. The Company is at:o actively involved in in 1998, the Company eliminated its L'niform Fuel Adjustment shaping the policies of the Midwest ISO to praect its shareholders' Clauses (FACs) as allowed by the law, which the Company expects interests. At this tune, the Co npany is unable to pr-dict the ulti-to benent shareholders in the future (see Note 1 - Summary of mate impact of electric industry restruduring on the Company's Significant Accounting Policies under Notes to Consolidated future financial condition, results of operations or hquidity.

Financial Statements for further informationt The Law contains a provision allowh.g for the potential recovery of a ponion of strand. Year 2000 issse able msts, which represent costs which would not be recoverable The Year 2000 issue relates to tow dates are stored and used in a restructured environment, through a transition charge collect-n computer systems, applications, and embedded systems. As the ed from customers who choose an alternate electric supplier. In century date change occurs, certain date-sensitive systems need to addition, the law mntains a provision requiring a portion of excess be able to recognize the year as 2000 and not as 1900 This inabil-earnings (as defined under the taw) for the years 1998 through 2(XH ity to recognize and properly treat the year as 20(X) may cause to be refunded to customers. See Note 2 - Regulatory Matters under these systems to process critical financial and operational informa-Notes to Consolidated Financial Statements for further infornution tion incorrectly. The Company's primary concern is the potential In December 1997, after evaluating the impact af the Law, the for any intermption in providing electric and gas service to cus-Company determined that it was necessary to write-off the gener-tomers, as well as the potential inability to process critical financial ation-related regulatory assets and liabilities of its Illinois retail and operational information on a timely bavs, includmg billing its electric business. This extraordinary charge reduced 1997 earnings customers, if appropriate steps ure not taken to address this issue.

$52 million, net of income taxes, or 38 cents per share. The

Management has developed a Year 2000 Plan (Plan) and Ameren's Company has also concluded that its renuining net generation-lioard of Diredors has been briefed about the Year 2000 Issue and related assets are not impaired for financial reporting purposes and how it may affect the Company.

that no plant writedowns are necessary at this time. See Note 2 -

1he Compan/s Plan to resolve the Year 2000 issue involves Regulatory Matters under Notes to Consolidated Financial three phases: assessment, planning, and implementation / testing.

Statements for funher information-Implementation of the Plan is directly super ised by each area's In Nissouri, where approximately 72% of the Company's retail responsible Vice President. A Year 2000 Project Director coordi- j electric revenues are derived, a task force appointed by the MoPSC nates the implementation of the Plan among functional teams who ;

irwestigated clearic industry restructuring and competition. In are addressing issues specific to a particular area, such as nuclear 1998, the task force issued a report to the MoPSC that addressed and non-nuclear generation facilities, energy management systems, i many of the restructuring issues, but did not provide a specific rec- l I

i i

I Aceren Corporation 19 4

m

4 4 gas distribution, etc. Ameren has also engaged certain outside in addressing the Year 2000 Issue, the Company will incur inter-consultants, technicians and other external resources to aid in for- nal labor costs as well as external consulting and other expenses to mulating and implementing the Plan. prepare for the new centmy. The Company estimates that its exter-The Company has completed its assessment phase, which nai costs (consulting fees and related costs) for addressing the Year included analyzing date-sensitive electronic hardware, software 2000 issue will range from $10 million to $15 million. As of applications and embedded systents and has developed a compli- December 31,1998, the Company had expended approximateiy $2.4 ance plan to address issues that were identified. Many of the major mulion. The Company's plans to complete Year 2000 modifications corporate computer systents at Ameren are relatively new and are based on nunagement's best estimates, which are derived utiliz-therefore are either Year 2000 compliant or only require minor ira numerous assumptions of future events including the continued modifications. Aho, several of the operating hardware and embed- availability of certain resources, and other faaors. Ilowever, there -

ded systems (i.e., microprocessor chips) use analog rather than can be no guarantee that these estinutes will be achieved, and actu-digital technology and thus are unaffected by the two-digit date al results could differ materially from those plans. Specific factors issue. In addition, the Company has contacted hundreds of ven- that might cause such material differences include, but are not lim- -

dors and suppliers to verify compl;ance. ited to, the availability and cost of personnel trained in this area, the The Company has also completed its planning phase. Items abihty to locate and correct all relevant computer codes, and similar that have been identified for remediation have been prioritized uncertainties.

into groups based on their significance to Company operations. The Company belieses ' hat, with appropriate modifications to The implementation' testing phase for all components /apphcations ' existing computer systems / components, updates by venders and is approxinutely 45% complete as of December 31,1998. The trading partners, and conversion to new software and hardware in Company expects to complete remediation of its significant com- the ordmary course of busjess, the Year 2000 issue will not pose ponents/ applications by the end of the third euarter 1999. signiicant operational problems for the Gimpany. Ilowever, if such With respect to third panies, for areas that interface directly conversions are not completed in a proper and timely manner by all with signiftant vendors, the Company has inventoried vendors and affected panies, the Year 2000 issue could result in material adverse major suppliers and is currently assessing their Year 2000 readiness operational and financial consequences to the Company, and there through surveys, websites and personal contact. ne Company c;m be no assurance that the Company's efforts, or those of vendors plans to follow up with major suppliers and vendors and verify Year and trading partners, interconnection affiliates, NERC or EPRI to 2000 compliance, where appropriate. The Company has aho address the Year 2000 Issue will be successful. The company is in queried its health insurance providers. To date, the Company is not the process of developing contingency plans to address potential aware of any problems that would nut ( :lly impact its financial risks, including risks of vendor / trading partners' noncompliance, as condition, resuhs of operations or liquidity; however, the Company well as noncompliance of any of the Company's material operating has no means of ensuring that these panies will be Year 2000 com- sptems. The first operational contingency plan addressing power pliant The inability of those parties to complete their Year 2000 grid issues is expected to be completed by the end of the first quar-resolution process could materially impact the Company. ter 1999. Contingency plans related to the business areas are expect-The Company is abo addressing the impact of electric power ed to be completed by the end of the second quaner 1999. At this grid problems that may occur outside of its own electric system. time, the Company is unable to predict the ultimate impact, if any, The Company has staned Year 2000 electric power grid impact of the Year 2000 Issue on the Company's financial condition, results planning through the system's various electric interconnection affil- of operations or liquidity; however, the impact could be material.

iations and is working with the Mid-American Interchange Network (MAIN) to begin planning Year 2000 operational pre. Coatiegencies paredness and restoration scenarios. As of November 30, 1998 See Note 12 - Commitments and Contingencies and Note 2 -

(the latest information available), MAIN was 88% complete with its Regulatory Matters under Notes to Consolidated Fin;mcial Statements assessment phase,74% complete with its planning phase and 36% for material issues existing at December 31,1998.

complete with the implementation / testing phase. In addition, the Company provides monthly status reports to the North American Morkef Risk ReIaied io Finaaclal lastrsments Electric Reliability Council (NERC) to assist them in assessing Year ond Commodity Ias!rsmenis 2000 teadiness of the regional electric grid. As of November 30, 1998 (the latest infornution available), NERC was 96% complete Market risk represents the risk of changes in value of a finan- ,

cial instrument, derivative or non-derivative, caused by fluctuations with its assessment phase,8A complete with its planning phase in interest rates and equity prices. The following discussion of the and 44% complete with the implementation / testing phase.

Through the Eledric Power Research Institute (EPRI), an industry- Company's risk management acthities includes " forward-looking" wide effort has been established to deal with Year 2000 problems statements that involve risks and uncenainties. Actual results could differ materially from those projected in the forward-kioking' state-affecting digital systems and equipment used by the nation's elec, tric power companies. Under this effort, participating utilities are ments. The Company handles market risks in accordance with working together to assess specific vendors' system problems and established policies, which may include entering into various deriv-test plans. The assessment will be shared by the industry as a whole to facilitate Year 2000 problem solving.

20 1998 Annual Report

. e ative transactions. In the normal course of business, the Company AmerenEnergy utilizes several techniques to mitigate its mar-also faces risks that are either non-financial or non-quantifiable. ket risk for purchased power, including t.tilizing derivative finan-Such fisks principally include credit risk and legal risk and are not cial instruments. A derivative is a contract whose vahe is depen-represented in the following analysis. dent on or derived from the value of some underlying asset. The derivative financial instruments that AmerenEnergy is allowed to Interest Rate R/sk utdize (which include forward contracts and futures contracts) are The Company is exposed to market risk through changes in dictated by a risk management ~"icT, which has been reviewed interest rates, principally at its subsidiaries, through its issuance of with the Auditing Conmittee of uneren's Board of Directors.

both long-term and short-term variable-rate debt, fixed-rate debt, Compliance with the risk management policy is the responsibility l

commercial paper and auction market preferred stock. The of a risk management steering committee, consisting of Company {

Company manages its interest rate exposure by controlling the officers and an independent risk management officer at amount of these instruments it holds within its total capitalization AmerenEnergy.

. portfolio and by monitoring the effects of market changes in inter. As of December 31,1998, the fair value of derivative financial est rates, instruments exposed to commodity price risk was immaterial. The If interest rates increase 1% in 1999, as compared to 1998, the Company expects an increase in the derivative financial instru-Comp;my's interest expense would increase by approximately $6 ments used to manage risk in 1999 due to expected growth at million and net income would decrease by approximately $4 mil- AmerenEnergy.

lion. This amount has beca detennined using the assumptions that the Company's outstanding variable-rate debt, commercial paper & fuity Price Risk and auction market preferred stock as of December 31,1998, con- he Company maintains trust funds, as required by the tinued to be outstanding throughout 1999, and that the average Nuclear Regulatory Commission and Missouri and Illinois state interest rates for these instruments increased 1% over 1998. The laws, to fund cenain costs of nuclear decommissioning (see Note rn~lel does not consider the effecta of the reduced level of overall 13 - Callaway Nuclear Plant under Notes to Consolidated Financial e nomic activity that would exist in such an environment. In the Statements for further information). As of December 31, 1998, event of a significant change in interest rates, management would these funds were invested primarily in domestic equity securities, likely take actions to further mitigate its exposure to this market fixed-rate, fixed-income securities, and cash and cash equivalents.

risk. liowever, due to the uncertainty of the specific actions that By meintaining a ponfolio that includes long-term equity invest-would be taken and their possible effects, the sensitivity analysis ments, the Company is seeking to maximize the returns to be uti-assumes no change in the Company's financial structure. lized to fund nuclear decommissioning costs. Ilowever, the equi-ty securities included in the Company's portfolio are exposed to Commod/ty Pr/cc Risk price fluctuations in equity markets, and the fixed-rate, fixed-ne Company is exposed to changes in market prices for nat- income securities are exposed to changes in interest rates. The ural gas and fuel and purchased power. With regard to its natura! Company actively monitors its portfolio by benchmarking the per-gas utility business, the Company's exposure to changing market formance of its investments against certain indices and by main-prices is in large part mitigated by the fact that the Company has taining, and periodically reviewing, established target allocation a Purchased Gas Adjustment Clause (PGA) in place in both its percentages of the assets of its trusts to various investment options.

Missouri and Illinois jurisdictions. The PGA allows the Company The Company's exposure to equity price market risk is in large part to pass on to its customers its prudently incurred costs of natural mitigated due to the fact that the Company is currently allowed to gas. With approval of the Mof'SC, Amerent'E is panicipating in an recover its decommissioning costs in its rates.

experimental program to control the volatility of gas prices paid by its Missouri customers in the winter months through the purchase Accounling Molfers of financialinstruments. In its November 1998 meeting, the Emerging issues Task Since the Company does not have a provision similar to the Force of the financial Accounting Standards ik)ard (EITF) reached PGA for its electric operations, the Company has entered into sev- a consensus on EITF Issue 98-10, " Accounting for Energy Trading eral long-term contracts with various suppliers to purchase coal and Risk Management Activities. ETTF 98-10 provk'es guidance and nuclear fuel to manage its exposure to fluduating fuel prices on the accounting for energy contracts entered into for the pur-

. (see Note 12 - Commitments and Contingencies under Notes t chase or sale of electricity, natural gas, capacity and transportation.

Consolidated Financial statements for further information1 With The EITF reached a consensus in EITF 98-10 that sales and pur-regard to the Company's exposure to commodity risk for pur- chase activities being performed need to be classified as either chased power, the Company has established a subsidiary, trading or non-trading. Furthermore, transactions that are deter-AmerenEnergy, Inc., whose primary responsibility includes man- mined to be trading activities would be recognized on the balance aging market risks associated with the changing market prices for sheet measured s fair value, with gains and losses included in purchased power for the Company's operating subsidiaries, camings. EITF ,,) includes factors or indicators to consider AmerenUE and AmerenCIPS.

Amoren Corporation 21

\

when determining if a transacti(>n is a trading or non-trading activ- In the libnois retail jurisdiction, the cost of fuel for electric ity. EITF 98-10 will be effective beginning in 1999 Currently, generation, w hich was previously reflected in billings to customers AmerenEnergy enters into contracts for the sale and purchase of through fuel adjustment clauses, has been added (o base rates as energy on behalf of AmerenUE and AmerenCIPS, These transac- provided for in the Law (see Note 2 - Regulatory Matters under tions are consideed non-trading activities and are accounted for Notes to Consolidated Financial Statements for further informa-using the accrual or settlement metimd, which represents industry tionL In the Missouri retail jurisdiction, the cost of fuel for electric practice. Should any of AmerenEnergy's future activities be con- generation is refkcted in base rates with no provision for changes sidered trading activities based on the indicators provided in EITF to be made through a fuel adjustment clause. In Illinois and 9&l0, a change in accounting practice would be required. EITF Missouri, changes in gas costs are generally reflected in billings to 9&lo is not expected to have a material impact on the Company's customers through purchased gas adjustment clauses. -

financial position or results of operations upon adoption. Many of Inflation continues to be a factor affecting operations, earn-the provisions of EITF 98-10 will likely be superceded by Statcaent ings, stockholders' equity and financial performance.

of Financial Accounting Standards (SFAS) 133, " Accounting for -

Derivative Instruments and Hedging Activities"(see below). 5efe Hsrbor 5tatesieat In June 1998, the Financial Accounting Standards Ik>ard Statements made in this annual report to stockholders which issued SFAS 133, " Accounting for Derivative Instruments and are not based on historical facts, are forward-kioking and, accord-liedging Activities." SFAS 133 establishes accounting and report- ingly, involve risks and uncertainties that could cause actual results ing standards for derivative instruments and for hedging adivities to differ materially from those discussed. Ahhough such forward-and requires recognition of all derivatives on the balance sheet looking statements have beer made in good faith and are based measured at fair value. SFAS 133 is effective for all fiscal quarters on reasonable assumptions, inere is no assurance that the expect-of as fiscal years beginning afterJune 15,1999. Earlier application ed results will be achieved. These statements include (without lim-is encouraged. SFAS 133 cannot be applied retroactively. At this im on) statements as to future expectations, beliefs, plans, strate-time, the Company is unable to detennine the impact of SFAS 133 gies, objectives, events, conditions, financial performance and the on its financial position or results of operations upon adoption. Year 2000 Issue. In connection with the " Safe liarbor" provisions In March 1998, the Accounting Standards Executive Committee of the Private Securities Litigation Reform Act of 1995, the of the American Institute of Certified Public Accountants issued Company is providing this cautionary statement to identify impor-Statement of Position (SOP) 9&l, " Accounting for the Costs of

, tant factors that could cause actual results to differ materially from Computer Software Developed or Obtained for Internal Use " SOP those anticipated. Factors include, but are not limited to, the 9&1 provides guidance on accotmting for the costs of computer effects of regulatory actions; changes in laws and other govern-software developed or obtained for internal use. Under SOP 98-1, mental actions; competition; future market prices for fuel and pur-certain costs, which are currently expensed by the Company, may chased power, electricity, and natural gas, including the use of be capitalized and amortized over some future period. SOP 98-1 is f nancial instruments; average rates for electricity in the midwest; effedive for fiscal years beginning after December 15,1998. SOP business and economic conditions; interest rates; weather condi-98-1 is not expected to have a material impact on the Company's tions; fuel prices and availability; generation plant performance; financial position or results of operations upon adoption.

monetary and fiscal policies; future wages and employee benefits costs; and legal and administrative proceedings.

Elletts o, nInflation and Changing Prices The Company's rates for retail electric and gas service are reg-ulated by the MoPSC and the Illinois Commerce Commission. Non-retail electric rates are regulated by the FERC.

The current replacement cost of the Campany's utility plant substantially exceeds its recorded historical cost. Under existing regulatory practice, only the historical cost of plant is recoverable ,

from customers. As a result, cash ' lows designed to provide recm-ery of historical costs through d< preciation might not be adequate to replace plants in future yea's. Regulatory practice has been ,

modified for the Company's generation ponion of its business in

, its Illinois jurisdiction, and may be modified in the future for the Company's Missouri jurisdiction (see Note 2 - Regulatory Matters under Notes to Consolidated Financial Statements for further infor-mationi. In adthtion, the impact on common stockholders is miti-gated to the extent depreciable propeny is financed with debt that l is repaid with dollars of less purchasing power. i

)

I l

22 1998 Annual Report

O O Q O O I I C GD t O G O I C t O III O Q t 6f I O 0 0 III O busands ofIMlars Escey Share and Per Sban Amounts sear endat twember31, I594 1997 JVKn Operkting Rivesses:

Electric $3,094,2!! $3,064,177 $3,061,856 Gas 216,681 249,815 254,412 Other 7,316 12,551 12,153 Total eperetisg reveaaes 3,318,208 3,326,543 3.328,421 Operating Exposses:

' Operations Fuel and purchased power 780,123 836,445 880,204 Gas 118,846 160,679 160,776 Other 647,157 585,214 543,998 1,546,126 1,582,338 1,584,978 Maintenance 312,011 310,241 302,203 Depreciation and amonization 348,403 346,000 339,276 Irmme taxes 267,673 234,179 253,005 Other taxes 272,774 'i71,711 273.034 Teial eperatIag eapeases 2,746,987 2,744,469 2,752,496 0peratiag Iaceae 571,221 582,074 575,925 Other laceae end (Deductiess):

Allowance for equity funds used during construction 5,001 5,244 6,870 Miscellaneous, net (2,609) (10,344) (21.229)

Total other income and (deductiess) 2,392 (5,100) (14,359) laceae Belere laterest Charges and Preferred Dividends 573,613 576,974 561,566 interest (berges sad Preferred Dividends:

Interest 181,580 185,368 180,402 Allowance fo borrowed funds used during construction (7,026) (7,462) (7,490)

Preferred dividends of subsidiaries 12,562 12,532 16,970 Net laterest charges sad preferred dividends 187,116 190.438 189,5 i2' laceme Before Ixtraordinary Clerge 3';5,497 386,536 371,6&1 fxtraordisery Charge, set of income taxes (Note 2) - (51,820) --

Nif lN(0ME $ 386,497 $ 334,716 $ 371.684 fornings per (ommon Shore - Basic and Diluted

, (based on overage shores colstending)

Income before extraordinary charge $2.82 $2.82 $2.71 Extraordinary charge -

(.38) -

llet income $2.82 $2.44 $2.71 AyiAGI (OMM0N $NA I$ 0UT$TANDiNG 137,215,462 137,215,462 137,215,462 See Neks to ConmMawd Mancial Swements.

Amoren Corporation 23

0 0 0 0 011 C 0 E 0 0 0010000 CDoct Thwands cfikdlars thember 31. 19% 1997 . ,

, Assets l

Property and Plant, at ailginal cost:

l l Flectric $11,761,306 $11,522,730 Gas 469,216 447,458 l Other 44,646 36,023 l 12,275,168 12,006,211 -

Irss accumulated depreciation and amortization 5,602,816 5,285,434 6,672,352 6,720,777 Construction work in progress: j Nuclear fuel in process 108,294 134.804 l Other 147,393 131,504 j Total property and plani, nel 6,928,039 6,987,085 lavestments and Other Assets: I Investments 86,694 97,188 Nuclear decommissioning trust fund 161,877 122,438 i Other 78,091 61,915

)

Total investments and other essets _ 326,662 284,541 (strent Assets:

Cash and cash equivalents 76,863 42,425 Accounts receivable - trade (less allowance for doubtful accounts of $8,393 and $4,845, respectively) 198,193 266,306 Unbilled revenue 150,481 102,864 Other accounts and notes receivable 76,919 49,765 Naterials and supplies, at average cost: ;

Fossil fuel 112,908 93,431 Other 132,884 134,152 Other 22,912 22.273 l Total current assets 771,160 711,216 l l

Regulatory Assets:

{

Deferred income taxes 633,529 639,792 j Other 188,049 201,913 ;

Total regulatory assets 821,578 844,705 *

{

IO!AL A55til $ 8.847,439 $ 8,827,547 I l

i l

See Notes to CormJulated Fmancial Statemenu l

1 21 19f 9 Annual Report

Thou.wsJs qfIk&qs, & cept kre aml(W Share Amounts thember 31. IVMi 1997 (epital and Llobilities (epitalitellen:

Common stock, $.01 par value, 400,000,000 shares authorized - 137,215,462 shares outstanding (Note td $ 1,372 $ 1,372 Other paid-in capital, principally premium on conunon stock 1,582,548 1,582,938 Retained earnings (see accompanying statement) 1,472,200 1,434,658 Total common stockholders' equity 3,056,120 3,018,968 Preferred stock not subject to nundatory redemption (Note 6) 235,197 235,197

. Inng-term debt (Note 8) 2.289,424 2,506,068 Total capitalirallon 5,580,741 5,760,233 Minority laterest in Conrolldated Subsidiary 3,534 3,534 (urrent Llobilities:

Current maturity of long-term debt 201,713 52,241 Shon-term debt 58,528 86,266 Accounts and wages payable 297,185 293,391 Accumulated deferred income taxes 66,299 56,094 Taxes accrued 114.106 110,566

, other 216,889 168,727 Total current liabilillat 954,720 767,285 P

Commitments and Contingencies (Notes 2,12 and 13)

Accumulated Deferred Income Taxes 1,521,417 1,536,696 Accumulated Deferred Investment Tax Credits 178,832 190,260 Regulatory 1.iability 193,937 224,225 Other Deferred Credits and I.iabilities 409,258 345.314 TOTAL (APITAL AND ll AllililE5 $8,847A39 $8.827,547 e

See Nks k) thn.wNated hmmcialStatements Amoreri Corporation 25

@'0 0 0 0 11 0 0 t 0 0 Otonomoot @t G o a ts r i cp w o kuunnds of[kilan Year eruktlDecember31. 19wt 1997 19tXi (ash Flows From Operating:

Income before extraordinary charge $386,497 $386,536 $371,684 Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 338,488 340,079 333,565 Amortization of nuclear fuel 36,855 37,126 37,792 Allowance for funds used during construction (12,027) (12,706) (14,3(O) .

Deferred income taxes, net - (24,849) (24,499) 12,665 Deferred investment tax credits, net (11,428) (18,%7) (9,531)

Changes in assets and liabilities-Recen utes, net (6,658) 11,476 (25,468)

Materials ar.d supplies (18,209) 16,523 2,376 Accounts and wages payable 3,794 (3,626) 7,302 Taxes accrued 3,540 45,321 6,259 Other 107,241 (68,820) 60,160 Nel rub provided by operating activities 803,244 708,443 782.444 (ash Flows From lavesting:

Construction expenditures (324,905) (380,593) (435,904)

Allowance for funds used during construction 12,027 12,706 14,360 Nuclear fuel expenditures (20,432) (35,432) ($1,176)

Other 10,494 16,122 (7,7&4)

Net cash used in lavesting activities . (322.816) (387,197) (480,50 5 Cash flows frem Flanating:

Dividends on common stock (348,527) (331,282) (326,855)

Redemptions -

Nuclear fuel lease (67,720) (28,292) (34,819)

Short-term debt (27,738) - (18,300) long-term dc bt (273,444) (123,444) (35,000)

Preferred stock . _ (63,92 0 (26)

. Issuances -

Nuclear fuel lease 16,439 40,337 43,884

' Short-term debt _ 17,198 9,847 inng-term debt 255,000 187,000 65,194 )

Net tesh used in fissating sativities (445,990) (302,407) (296,075) l Net (bsuge in tesh and tesh equivalents 34,438 - 18,839 5,865

-(ash and tesh equivalents of beglanlag el year' 42,425 23,586 17,721 *

(A$N AND (ASH IQUlVAtlNi$ AT EN2 or YEAR $ 76,863 $ 42,425 $ 23,586

' Cash paid during the periods:

Interest (net of amount capitalized) $175,168 $162,459 $167,433 Income taxes $291,291 $242,222 $248,096 SUPPL.L\lL%TAL EMSClOSl'RE OFMWCA5fl TEus4C7KW An ettnordsnary charge to earnings uns morJed sn thefourth quarter 41997pr the urste-ofofgeneration rehual regulatory assets and hahtit-

. ties of the Comfuny's Illtrwis retail ekstric bustness as a result <fekstnc industry rutructuring kytshuton cruu ted en flisrwis in Iksernber I997.

& tsrt'Ofreducalearnirgs $52 milMn, net ofincome tares. Scw Note 2~ Regulatory Mattern under &ks to Cons <dklatal FinancialStatements prprther tgormatwn.

Ses Notsu to Consolidated Fsnancial Statements 26 1998 Annual Report I

COnOOlldeted Statensent Of Roteined EarninOO 7botaands ofLMlars f ear endallhember31. lYM IW7 !YA BeIan,ce a1 Beginning oI Period $1,434,658 $1,431,295 $1,385,629 (

Add.

Net income 386,497 334,716 371/>84 Deduct:

Common stock cash dhidends 348,955 331,353 326.018 B ALANCE AT (LOSE OF Pm00 $1,472,200 $1,434.658 si,431.295 5 Selected Gnarterly Information IUnaudsted) 4 7honaands ofIk>llars, Erceptpr Share Amounts Ouor1er Eaded Operating Operating Net Income Earnings tLoss)

Revenues Income (Loss) per Common Share Mcrch 31,1998 (a) $ 700,810 $ 90,432 5 39,927 $ .29 March 31,1997 (a) 759,063 95,461 44,977 .33 June 30,1998 (b) 821,777 128,158 83,632 .61 June 30,1997 (b') 791,821 132,492 79,686 .58 5eplember 30,1998 (c) 1.117,118 283,652 236,657 1.73 September 30,1997 1,043,137 269,093 215,423 1.57 December 31,1998 678,503 68,979 26,281 .19 December 31,1997 (d) 731.922 85,028 (5.370) (00 la) 1beprst quarter <f LYM and IW7 taludal cratus to hinswun elatric custurners u hkh reduced nes tncome atgmxrnmately $6 mdhon. or 4 cenn ps share. and $7 milhon, or 5 cents pr share, respectur(y (b) Ibe second quarter t{ l9'M arul IW7 includal credas to Alawun eintric customers u hkh relucal net income affwmimately $18 mdhon, or -

14 ceras per dare, and $4 millum, or3 cenuper sbarr, resptthely Calasuay Plant refuehng expmses. ubu h decrecued net mconw ofprutt-mately $18 mdlus tw 13 cens per share, utn tuluded in the saund quarter e{!9(M.

(c) Ibe Ibard quaner af I96w huluded a nonrecumng charge related to the targeted ssparatum plan u hkb reducal net income $!$ malv>n, or

+

1I cenb per share Sa Mte 3 - Tarytal kptratton 11an unJer kt s to Consolulatal Anamial Statemennforfurther informatum.

Id) Thef urth quarter <{1997 Included a net retersal cf merger-relatal e.xpenws e{$17 mdlwn, or 13 centspr h,tre Thefourth quarter of 1997 aho includal an extraordostry charge <f $ U mdhon. net cfIncome tares, <w 3R centsp>r share (sse ble 2- Regulatory Alatters under Notes s /

to Consolulated hnancial Statemennforfurther unformatum)

Other changes in quarterly earnings are due to the efert of unnher on sales and otherfactors that are characterutic ofpubhc utdsty <pr atums.

O a

p ( N mk n N( $ W $.

Ameren Corporation 27 3

NotOO TO 0 C C 0 0110 0 t 0 0 FIQOOOlol OtotomOcto Maintenance expenditures and the renewal of items not considered 0"- . units of propeny are charged to income as incurred When umts of Summary of $lgnificant Accounting Policies depreciable property are retired the original co'st and rdnoval wst, ess s Ivage v lue, are charged to accumulated depreciation.

liasis of Prvsentation Ameren Corporation (Arneren) is a holding company regis- IA1"rCidlion tered under the Public Utility llolding Company Act of 1935 Depreciation is provided over the estimated hves of the vari-(PCIICA). In December 1997, Union Electric Company ous classes of depreciable propeny by applying compnite rates on (AmerenUE) and CIPSCO Incorporated (CIPSCO) combined to a straight-line basis. The provision for depreciation in 1998, 1997 form Ameren, with AmerenUE and CIPSCO s subsidiaries, Central and 1996 was approximately 3% of the average depreciable cost.

Illinoia Public Senice Company (AmerenCIPS) and CIPSCO fuci and Gas O>sts Investment Company (CIC'), becoming wholly-owned subsidiaries in the Missouri and Illinois retail electric jurisdictions, the cost of Ameren (the Merger). The accompanying consolidated financial of fuel for eintric generation is renected in base rates with no pro- '

statements (the financial statements) renect the accounting for the vision for changes to be made through fuel adjustment clauses (see Merger as a pooling of interests and are presented as if the com- Note 2 - Regulatory Matters for further information). In 1997 and panies were combined as of the earliest period presented. 19% changes in fuel costs were generally reDected in billings to llowever, the financial information is not necessarily indicative of electric customers through the fuel adi ustment clauses. In the the results of operations, financial pmition or cash Dows that Illinois and Missouri retail gas jurisdictions, changes in gas costs would have occurred had the Merger been consummated for the are generar y reflected in billings to gas customers through pur-periods for which it is given effect, nor is it necessarily mdicative chased gas . diustment clauses.

of future <esults of operations, financial position or cash Hows. Nuclear fuel The outstanding preferred shares of AmerenUE and AmerenCIPS The cost of nuclear fuel is amonized to fuel expense on a were not affected by the Merger. unit-of-pnxtuction basis. Spent fuel disposal cost is charged to The accompanying financial statements include the accounts expense based on kilowatthours sold.

of Ameren and its consolidated subsidiaries (collectively the Company). All subsidiaries for which the Company owns direaly Gli and Qh Quiralenn Cash and cash equivalents include cash on hand and tempo-or indirectly more than 50% of the voting stock are included as ary investments purchased with an original matunty of three consolidated subsidiaries. Ameren's prinury operating companies, months or less.

AmerenUE and AmerenCIPS, are engaged principally in the gener-ation, transmis3 ion, distribution and sale of eleuric energy and the #""'""i"*

purchase, distribution, transportation and sale of natural gas. The The Company and its subsidiaries file a consolidated federal operating companies sene 1.5 million electric and 300.000 natural m wmm. Nfmed m awets and liabihties are recognized for the m awquenms of transacions that have been treated different-gas customers in a 4500-square-mile area of Missouri and Illinois.

The Company's non-regulated subsidiaries include CIC, an invest-r nan mp ng and m wtum purpmes, .neasuwd using statutory tax rates.

it.g subsidiary, and AmerenEnergy, Inc., an energy marketing sub-Investment tax credits utilized in prior years were deferred and sidiary. The Company also has a 60% interest in Electric Energy, are being amortized over the useful lives of the related properties.

Inc. (EED. EEI owns and operates an electric generation and trans-mission facility in Illinois that supplies electric power primanly to Elouunafor furuls Used During Construction a uranium enrichment plant kicated in Paducah, Kentucky. All sig. AUowance for funds ud dunng ammas (AO is a utiMy nificant intercompant 'talances and transactions have tren elimi- industry acmunting praaice whereby the cost of Inrrowed funds and nated from the consolidated financial statements. dw mt of equMunddpmfel and amnon Mhoh equity) apphcable to the Company's construaion program are capitalized as a Regulation cost of umstruaion. AFC does not represent a current source of cash '

Ameren is subject to regulation by the Securities and Exchange funds. This accounting pradice olTsets the etTect on camings of the Canmission (SEC). AmeenUE is also regulated by the Missouri mst of Snancing current construction, and treats such financing costs l

Public Service Commission (MoPSC), the Illinois Commerce in the same manner as construction charges for labor and nuterials.

Commission (ICC) and the Federal Energy Regulatory Commission Under accepted ratemaking practice, cash recovery of AFC, as I (FERC). AmerenCIPS is also regulated by the ICC and the FERC. The well as other construction costs. occurs when completed projects -

accounting policies of the Company conform to generally accepted are placed in sercice and reDected in customer rates The AFC accounting principles (GAAP). See Note 2 - Regulatory Matters for ranges of rates used were 6% - 94 during 1998, and 8% - 9% dur-l funher infornution. ing 1997 and 1996 l Property and Plant Cnamurti:cd Debt Discount, Pwmlum and Tvpense The cost of add tions to, and bererments of, units of propeny Discount, premium and expense associated with long-term and plant is capitalized. Cost includes labor, material, applicable debt are amortized over the lives of the related issues.

taxes and overheads. An allowance for funds used during con- gggyyy i struaion is also added for the Company's regulated assets, and The Company accmes an estinute of electric and gas revenues for interest during construction is added for non-regulated assets.

servim rendered but unbilled at the end of each annunting period

]

I 28 1998 Annual Report I

i

Duluation ofAssetsArimpairment million credit for the final year of the plan, which reduced eamings Statement of Financial Accounting Standards (SFAS) 121, $24 million, or 18 cents per share. In November 1998, the MoPSC

Accounting for'the impairment of Long-Lived Assets and for Long- staff proposed preliminary adjustments tc the Company's estinuted Lived Assets to be Di.sposed Of' prescribes general standards for crnlit. The credit for the final year of the pbn will be subject to reg-the recognition and measurement of impairment losses. The ulatory proceedings. De Company expects that the regulatory pro-Company determines if long-lived assets are impaired by corapar- ceedings will be completed in 1999. The staffs proposed adjust-ing their undiscotmted expected future cash flows to their carrying ments, if ultimately accepted, could increa3e the Company's esti-amount. An impairment loss is recognized if the undiscounted mated credit up to $10 million.

expected future cash flows are less than the carrying amount of the included in the joint agreement approved by the MoPSC in its e asset. SFAS 121 also requires that regulatory assets which are no February 1997 order authorizing the Merger, was a new three-year longer probable of recovery through future revenues be charged to experimental alternative regulation plan that will run fnunJu:y 1,1998, earnings (see Note 2 - ReFulatory Matters for further information). through June 30, 2001. Like the original plan, the new plan requires

. As of December 31,1998, no impairment was identified. tlut eamings over a 12.61% ROE up to a l#6 ROE will be shared 5toch Gunpensation Plan, equally between astomers and sharehoklers. He new three-year The Company applies Accounting Principles Ikurd Opinion plan will also retum to customers 90% of all camings alxwe a 1M6 ROE (APB) 25, " Accounting for Stock Issued to Employees

in account. up to a 16% ROE. Eamings above a 16% ROE wiu be credited entire-3 ing for its plans. ly to mstomers. In addition, the joint agreement prmides for a Dirnings IVr Share # #' ' ~## ' '" ' ' '

- - 4""# "" 8# """ '""**#""" #

ne Company's calculation of basic and diluted earnings per share resulted in the same earnings per share amounts for each of U"*'#*P""*" "#" "U"" P "' # "P""Y #

"##8 the years 1998,1997 and 1996. The reconciling item in each of the Y "PP million to $20 million on an annualized lusts. Ilowever, the MoPSC years is comprised of assumed stock option conversions which increased the number of shares outstanding in the dduted errnings d b pmposed adjustments to the Company's estinute tused upon per share calculation by 29,787 shares, 7,313 shares and 12,879 dieir methodokigy of calculating the weather-adi usted cashts. In addi-shares m 1998, !997 and 1996, respectively, h -

@ ud with the faul year of the original expenmental ahemative regulation plan will impact Use ofEst/ mate 5 the final Missouri ekstric rate decrease as well The Company expeas The preparation of financial statements in conformity with that the regulatory proceedings associated with detennining the GAAP requires management to make certain estimates and Missouri ekctric rate decrease will be completed in 1999. Ee staffs assumptions. Such estimates and assumptions may affect reported proposed adjustments, if ultimately accepted, could increase the amounts of assets and liabilities and disck>sure of contingent asse:s Comp;my's proposed Missouri elearic rate decrease by $15 million to and liabihties at the date of the financial statements and the report- $20 whon.

ed amounts of revenues and expenses during the reporteJ period.

In December 1997, the MoPSC approved a $12 million annu-Actual results could differ from those estimates. al rate increase for natural gas senice in AmerenUE's Missouri Reclass/fications jurisdiction. The rate increase became effective in February 1998.

Certain reclassifications have been made to prior-years finan- In June 1998, AmerenUE and AmerenCIPS filed requests with cial statements to conform with 1998 reporting. the ICC to increase rates for natuul gas service in the IUincis juris-diction. In February 1999, the ICC approved a $9 million annual gg"- ry ~

rate increase. The rate increase became effective in February 1999, i(J 4, In 1998, Ameren's operating subsidiaries joined a group of Regalaiory Metiers nine other utility companies which support the . formation of the Midwest Independent System Operator (Midwest ISO). An ISO

, in July 1995, the MoPSC approved an agreement establishing

contractual obligations involving the Company's Missouri retail elec- P##*8' ' " ' " " ' " * ""Y""""" " ""

tric rates. Included was a three-year experimental ahernative regu- 'I"#* '#" Y"

'##"'fY

""# "8 PN# "8 #" ""

, lation plan that ran from July 1,1995, through June 30,1998, which

N" "8 # "1 *** *""

regulated by FERC. De FERC condiuonally approved the Midwest

, provided that earnings in those years m. excess of a 12.61% regula-tory rerum on equity (ROE) be shared equally between customers ISO in September 1998, and it is expected to be operational by the g g,s memhe ship in the Midwest ISO must be and stockholders, ar.d earnings above a 14% ROE be credited to cus-tomers. The formule for computing the credit used twelve-month approved by the MoPSC. The Midwest ISO covers eight states and M 40$0 miles of transmission line and 62,000 resuhs endingJune 30, rather than calendar year earcings. In 1996' the Company recorded a $47 million credit for the first year of the megawatts of electric power. Collectively, the member companies g gg plan. This credit reduced earnings $28 million, or 20 cents per share. During 1997, the Company recorded a $20 million credit for in addition, certain states are considering proposals or have the second year of the plan, which reduced earnings $11 million, or adopted legislation that will promote competition at the retail level.

8 cents per share. In 1998, the Company recorded an estimated $43 in December 1997, the Governor cf Illinois signed the Electric Amoren Corporation 29

Service Customer Choice and Rate Relief Law of 1997 (the bw) reporting under SFAS 71 allows companies whose service obliga-providing for electric utility restructuring in llhnois, This legisla- tions and prices are regulated to nuintain assets on their balance tion introduces competition into the supply of ekctiic energy in sheets representing costs they reasonably expect to recover front Illinois. customers, through inclusion of such costs in future rates. SFAS l'nder the Law, retail direct aness, which allows customers to 101, " Accounting for the Discontinuance of Application of FASil choose their electric generation supplier, will be phased in over Statement No. 71," specifies how an enterprise that ceases to meet several years. Access for commercial and industrial customers wil! the enteria for application of SFAS 71 for all or part of its opera-occur over a period from October 1999 to Ikcember 2000, and tions should report that event in it3 financial statements. In gen-access for residential customers will occur after May 1, 2002. eral, SFAS 101 requires that the enterprise report the discontinu-The Law includes a 5% residential electric rate decrease for ance of SFAS 71 by eliminating from its balance sheet all regulato- .

the Company's Illinois elecric customers, effective August 1,1998. ry assets and liabilities related to the portion of the business that This rate decrease reduced electric revenues approximately $6 mil- no longcr meets the SFAS 71 criteria. The Emerging issues Task l lion in 1998 and is expected to decrease electric revenues $14 mil- Force of the Financial Accounting Standards Board (EITF) has con- . l lion annually thereafter, based on estimated levels of sales and cluded that application of SI-AS 71 accounting should be discon- l assuming normal weather conditions. De Company nuy be sul> tinual once sufficiently detailed deregulation legislation is issued ject to additional 5% residential elearic rate decreases in each of for a separable portion of a business for which a plan of deregu-20tU and 2002, to the extent its rates exceed the midwest utility lation has been established. Ilowever, the EITF further concluded average at that time. The Company's rates are currently below the that regulatory assets associated with the deregulated portion of midwest utility average. the business, which will be recovered through tanffs charged to As a result of the bw, AmerenUE and AmerenCIPS tiled prm customers of a regulated portion of the business,350uld be asso- I posals with the ICC to eliminate the clearic fuel adiostment clause ciated with the regulated portion of the busmess from which future )

for Illinois retail custonwrs, thereby including a historical level of fuel cash recovery is expected (not the portion of the business from costs in bae rates. '!he ICC approval AmerenCIPS' and AmerenUE's which the costs originated), and can therefore continue to be car-filings in March and April 1998, respectively. ried on the regulated entity's balanc sheet to the extent such The bw contains a provision requiring one-half of ewess assets are reemered. In additim,3FAS 121 establishes accounting earnings from the Illinois regulated jurisdicion for the years 1998 standards for the impa!; ment of long-lived assets.

through 2004 to be refunded to Ameren's Illinois customers. Due to the enactment of the Law, prices for the retail supply Excess earnings are defined as the excess of the tw& year average of electric generation are expected to transition from cost-based, annual rate of return on common (quity over the two-year average regulated rates to rates determined in large pan by competitive of the average monthly yields of the 30-year U.S. Treasury bonds, market forces in the state of Illinois. As a result, the Company dis-plus prescribed percentages ranging from 5.5% to 6.5%. Filings continued application of SFAS 71 for the Illinois retail portion of its must be made with the ICC ca or before March 31 of each year generating business (i.e., the portion of the Company's business 2000 through 2005. At this time, the Company :s unable to deter- related to the supply of electric energy in Illinois) in the founh mine the impact of this provision on its future financial condition, quarter of 1997. The Company evaluated the impact of the law results of operations or hquidity. on the future reco<erability of its regulatory assets and liabilities Other provisions of the Law include (1) potential recovery of related to the generation portion of its business and determined a portion of strandable costs, which represent costs which would that it was not probable that such assets and liabilities would be not be recoverable in a restructured environment, through a transi- recovered through the cash flows from the regulated portion of its tion charge collected from customers who choose another electric business. Accordingly, the Company's generation-related regulato-supplier; (2) a mechanisra to semritize certain future revenues; (3) ry assets and liabi!ities of its Illinois retail electric business were a rcquirement to file a delivery service tarifT in March 1999 for cus- written off in the fourth quarter of 1997, resulting in an extraordi-tomers who choose altemative suppliers; and (4) a provision reliev- nary charge to earnings of $52 million, net of income taxes, or 38 ing the Company of the requirement to file electric rate cases or cents per share. These regulatory assets and liabilities included alternative regulatory plans in Illinois following the consummation previously incurred costs originally expected to be -

of the Merger to reflect the effeos of net merger savings. collected / refunded in future revenues, such as fuel contract The Company's accounting policies and financial statements restructuring costs, deferred charges related to a generating plant, conform to GAAP applicable to rate-regulated enterprises and costs associated with an abandoned scrubber at a fossil plant, and -

reflect the effects of the ratemaking process in accordance with income tax-related regulatory assets and liabilities. In addition, the SFAS 71, " Accounting for the Effects of Certain Types of Company has evaluated whether the recoverability of the costs Regulation.' Such effects concern nuinly the time at which vari, associatsd vith its remaining net generation-related assets has ous items enter into the determination of net income in order to been impaired as defined under SFAS !21. The Company has con-follow the principle of nutching costs and revenues. For exam- cluded that impairment, as defined under SFAS 121, does not exist ple, SFAS 71 allows the Company to record certain assets and lia- and that no plara writedowns are necessary at this time. At bilities (regulatory assets and regulatory liabdities) which are December 31,1998, the Company's net investment in generation expected to be recovered or settled in future rates and wouki not be recorded under GAAP for non-regulated entities. In addition, JO 1998 Annual Report

j i

facihties related to its Ilhnois retail jurisd ction approximated $841 Income Taxes see Note 9 - Income Taxes.

million and was included in electric plant in-senice on the Callaway Costr P . resents Callaway Nuclear Plant operations and Company's con %olidated balance sheet. maintenance exp nses, property taxes and carrying costs incurred The provisions of the Law could also result in lower rev- between the plant in-senice date and the date the plant was enues, reduced profit margins and increased costs of capital ar:d reflected in rates. These costs are being amonized over the remain-operations expense. At this time, the Company is unable to deter- ing life of the plant (through 2024L mine the impact of the Law on the Company's future financial Unamortized Loss on Reacqu/ red Debt: Represents losses related condition, results of operations or hquidity. to refunded debt. These amounts are being amonized over the in Missouri, where approximately 7&o of the Company's retail lives of the related new debt issues or the remaining lives of the o electric revenues are derised, a task force appointed by the MoPSC old debt issues if no new debt was issued.

investigated clearic industry restructuring and competition. In Nerger Costs: Represents the portion of merger-related expenses 1998, the task force issued a rern:t to the MoPSC that addressed

.' many of the restructuring issues, but did not provide a specific rec.

applicable to the Missouri retail jurisdiction. These costs are being amortized within 10 years, based on a MoPsc order.

ommendation or approach to restrudure the industry. In addition, The Company continually assesses the recoverability of its in 1998, the MoPSC staff issued a proposed plan for restructunng regulatory assets. Under current accounting standards, regulatory Missouri's electric industry. %e staffs plan addressed a number of assets are written off to earnings when it is no longer probable that issues of concern if the industry is restructured in Missouri. It also such amounts will be recovered through future revenues included a propos? for less than full recovery of strandable costs. Ilowever, as noted in the above paragraphs, electric ind%try

%e stafTs plan has not tven addressed by the MoPSC A joint leg- restruauring legislation may impact the recoverability of regulato-islative committee is also conduding hearings on these issues. ry assets in the future.

The Company is unable to predict the timing or ultimate out- In Aptil 1996, the FERC issued Order 888 and Order 889 relat-come of electric industry restructuring in the state of Missouri, as ed to the industry's wholesale electric business. In January 1998, well as the impact of potential electric industry restructunng mat- the Company filed a combined open access tariff that confonns to ters on the Company's future financial condition, results of opera. the FERC's orders.

tions or liquidity. The potential negative consequences of electric industry restructuring could be significant and include the impair- p" " Q ment and writedown of cenain assets, including generation-relate 1 V . U plant and net regulatory assets, lower revenues, reduced profit Torgeted Separaiioa Ploa margins and increased costs of capital and operations expense. At in July 1998, the Company offered separation packages to December 31,1998, the Company's net investment in generation employees whose positions were eliminated through a targeted facilities related to its Missouri juri3 diction approximated $2.5 bil-separation pla, (EP). During the third quarter of 1998, a nonre-lion and was includc<l in eledric p' ant in-ser ice on the Company's curring pre-tax charge of $25 million was reccrded, which reduced balance sheet. In dition, at December 31, ,1998, the Company's earnings $15 million, or 11 cents per share. This represented costs Missouri net gen .ation-related regulatory assets approximated 5166 million, incurred to implement the BP. The remaining liability associated with the TSP at December 31,1998 was $14 million.

In acroidance with SFAS 71, the Company has deferred cer-tain costs pursuant to actions of its regulators, and is currently recovering such costs in electric rates charged to customers.

0..

L At December 31, the Company had recorded the following g g,,,,", g g,, ,g g l4 regulatory assets and regulatory liability:

Market Risk f,, m,,,, m g The Company engages in price risk management activities Regclotory Assell: related to electricity and natural gas. In addition to buying and sell-ng these commodities the Company uses derivat ve financial instru-Inccme taxes $634 $640 ments to manage marcer risks and reduce exposure resulting from Callaway costs 95 99 fluctuations in interest .ates and the prices of electricity and natural

, Unamortized loss on reacquired debt 33 32 gas. Derivative instrum-nts used include futures and forward con-Merger costs 24 28 tracts. The use of thes, types of cor tracts allows the Company to Other 36 46 manage and hedge its contractual commitments and reduce expo-Regulatory Assets $822 $845 we relaW to h,dty of commodity market pies.

Credit %e Regulatory lichilify: Credit risk represents the accounting loss that would be rec-Income taxes $199 $21, ognized if counterparties fail to perform as contracted. New York Regulatory Liabihty $199 $1g Mercantile Exchange (NYMEX) traded futures contracts are guar-i anteed by NYMEX and have nominal credit risk. On all other transactions, the Company is exposed to credit risk in the event of l nonpmformance by the counterpanies in the transaction.

Amoren Corporation 31

The Company's financial instruments subjed to crecht risk con- acquired in a merger or other business combination trarsaction sist primarily of trade accounts receivable and forward contracts. after a person or group has acquired 15% or more of the The risk associated with trade receivables is mitigated by the large Company's outstanding common stock, each right will entitle its number of customers in a broad range of industry groups compris- holder to purchase, at the right's then-current exercise price, a ing the company's customer base. The Companfs revenues are pri- number of the acquiring company's common shares having a mar-marity derived from sales of eledricity and natural gas to customers ket value of twice such price. The acquiring person or group will in Missouri and Illinois. For each counterparty in forward contracts, not be entitled to exercise these rights. The SEC approved the plan the Company analyzes the counterparty's financial condaion prior to under PUliCA in December 1998. The rights were issued as a div.

entering into an agreement, establishes credit limits and monitors the idend payable January 8,1999, to sharehoklers of record on that appropriateness of these limits on an ongoing basis. date; these rights expire in 2008. One right will accompany each .

new share of Ameren common stock issued prior to such expira-yp' tion date.

nv " .()

2 At December 31,1998 and 1997, AmerenUE and AmerenCIPS .

Nu(lear FseI Lease had 25 million shares and 4.6 million shares respectively, of autho-rized preferred stock.

The Company has a lease agreement that provides for the Outstanding prefeued stock is entitled to cumulative dividends financing of nuclear fuel. At December 31,1998, the maximum and is redeemable at the prices shown in the following table:

amount that could be financed under the agreement was $120 mil-lion. Pursuant to toe terms of the lease, the company has assigned to the lessor certain contrads for purchase of nuclear fuel. The Preforted Stock Outstanding Not Subject Io Mandatory Redemption:

lessor c,btains, through the issuance of commercial paper or from , ,

direct loans under a committed revolving credit agreement from gnons arr ssare) im im commercial banks, the necessary funds to purchase the fuel and without par value and stated make interest payments when due. value of $100 per share -

The Company is obligated to reimburse the lessor for all $7f>4 Series - 330,000 shares $103.82 - note fa) $ 33 $ 33 expenditures for nuclear fuel, interest and related costs. $5.50 Series A - 14,000 shares 110.00 1 1 Obligations under this lease become due as the nuclear fuel is con- $4.75 Series - 20,000 shares 2 102.176 2 sumed at the Company's Callaway Nuclear Plant. 'the Company reimbursed the lessor $23 million in 1998, $31 million dunng 1997 - 26 shares M 20 20

$4.50 Series - 213,595 shares 110.00 - note 00 21 21 and $37 million during 1996.

The Company has capitalized the cost. including certain inter. $4.30 Series - 40,000 shares 105.00 4 4 est costs, of the leased nuclear fuel and has recorded the related $4.00 Series - 150,000 shares 105.625 15 15 lease obligation. During 1998, the total interest charges under the $3.70 Series - 40,000 shares IM75 4 4 lease were $5 million. In both 1997 and 1996, the total interest charges $3.50 Series - 130,000 shares 110.00 13 13 under the lease were $6 million. Interest charges for these years were W th par value of $100 per share -

based on average interest rates of approximately 6%. Interest charges 4.0% Series - 150,000 shares 101.00 15 15 of $3 million were capitalized in each respedive year.

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 5boreboIder RIgbt: Plaa oad 5.16% Series - 50,000 shares 102.00 5 5 Preierred 5tock af 5absidisrles 1993 Audion - 300,000 shares 100.00 - note (c) 30 30 In October 1998, the company's Ikrard of Directors approved 6.625% Series - 125,000 shares 100 00 12 12 a share purchase rights plan designed to assure shareholders of fair Without par value and stated .

and equal treatment in the event of a proposed takeover. The value of $25 per share -

rights will be exercisable only if a person or group acquires 15% $1.735 Series - 1,657,500 shares 25.00 42 42 or more of Ameren's common stock or announces a tender offer, Total Prefarred 0uts1anding 5Io(k Not -

the consummation of which would result in ownership by a per- Subject to Mondolory Redempflos $235 $235 son or group of 15% or more of the common stock. Each right will F

(al lW""iM r6md'r li 3*M r'r"'"ad dah"'a# 'o f'ooter sharr-entitle the holder to purchase one one-hundredth of a newly f issued preferred stock at an exerci3e price of $180. If a person or ((f T'[,N'", "7" '$g ,,,,, g ,4,,g,y group acquires 15% or more of Ameren's outstanding common on sbe company s selunon gf cmain defined dud ndpenwt iengibs.

7de a,crage dusdend rute dunns 19m uas 4 on stock, each right will entide its holder (other than such person or raembers of such group) to purchase, at the right's then<urrent exercise price, a number of Ameren's common shares having a market value of twice such price. In addition, if Ameren is 32 1998 Annual Report

I l

e I

yQ"" "f ~ 19Wf 1997 nU / En vir onm e n tal Imp ro v e m e nt/ Pollution

$borf Term B'orrowings Control tevenut Ionds Short-term lx>rrowings of the Company consist of bank loans 1984 Series A paid in 1998 -

80 (maturities generally on an overnight basis) and commercial paper 1984 Series B paid in 1998 -

80 (maturities generally within 10 45 days) At December 31,1998 and 1985 Series A due 2015 - note (c) 70 70 1997, $59 million and $86 million, respectively, of short-term bor. 1985 5eries B due 2015 - note (c) 57 57 rowings were outstanding. The weighted average interest rates on 1990 Series B 7.60% due 2013 32 32 lx>rrowings outstanding at December 31,1998 and 1997, were 1991 Series due 2020 - note (c) 43 43 4.9% and 6.5%, respectively. 1992 Series due 2022 - note (c) 47 47

% At December 31, 1998, the Company had committed bank 1993 Series A 6%% due 2028 35 35 lines of credit aggregating $217 million (all of which was unused 1993 Series C-1 due 2026 - note (c) 35 35 and $170 million was available) which make available interim 1998 Series A due 2033 - note (c) 60 -

financing at various rates of interest based on IJBOR, the bank cer. 1998 Series B due 2033 - note (c) 50 -

tificate of deposit rate, or other options. These lines of credit are 1998 Series C due 2033 - note (c) 50 -

renewable annually at various dates throughout the year. Other 3.875% 7fo% due 2014 through 2028 80 80 559 559 y p' ~g Subordinated Deferroble Interest Debentures nU U 7.69% Series A due 2036 - note (d)

Long Term Debt Unsetured loans

~66 66 In Malwns long-term debt osastandtng at (Member 31, "

1999 1997 first Nortgage lands - note (a) 1991 Senior hiedium Term Notes 6%% Series due 1999 $ 100 $ 100 8fo4 due through 2005 47 54 74% Series W due 1999 50 50 8 33% Series due 2002 1994 Senior Afedium Term Notes 75 75 6.61% due through 2005 54 62 64% Series Z due 2003 40 40 111 172 7.65% Series due 2003 100 100 6%% Series due 2004 htlear fuel Mse 66 H7 188 188 74% Series due 2004 Unamortized Discount and Premium on Debt (8) (11) 85 85 Maturities Due Within One Yeor (202) (52) 7 %% Series X due 2007 50 50 ToIollong Term Debi $2.289 $2,506 6M% Series due 2008 148 148 7.61% 1997 Series due 2017 40 40 (a)At twember31, in suhtantuany an of thepmpery andplant uas mortgaged 7.40% Series due 2020 - note (b) 60 60 '"I*" d"#""'" *' e"*"'"' '" " " 6 '*

""'T.

hm u'"er#

e Lssued '"*". '" @ 'h' 8M% Series due 2021 125 125 (b)Em anmentallmpnm ent Senes 8 %% Series due 2022 104 104 (c> Inn rest rates, and thepenods during ubich such mies apply, nary dqwndmg on 8% Series due 2022 85 85 '""I'"Y""'"""*/'"'"#d"*'"""'"'*'"'*"'""""'"'"

frur the)mr iVM arv asfoHour 7.15% Series due 2023 75 75 iwtSSenesA 3m 7% Series due 2024 100 100 f f* 5 S"8 8 3 25 6.125% Ser.es due 2028 5.45% Series due 2028 - note (b) 60 44

7M9 3[$

44 1993 senes 3 x4

Other 5.375% - 7.05% due 1999 through 2008 168 186 im sena a 3 5+*

19rM Senes B 3 50 %

1,697 1,655 f 92t Seng, c 3.3 75 s (d)Dunng the terms of the debentures, the Company may. under certasn csrcum-stances, defer thepaymera of snterntfor up tofit e years (e) A bank cmist agreement, due 200tl, permas the Company to bornou' or to suffort commercialpaper bom>utngs up to $300 milhon Interest mies u ill tury Jttnind-ung on market condstums At LWember 31,1921, no such borroutngs urre out.

standmg (f) A bank credit agrwment, due 2003, permus the Ccmspany to bonou up to

$200 mdlkm. Interest rules util tury d<pending on market condawns and the Company's selectwn of tartous qptions under the agrwment At themler 31, 19% the aterage annuahzed interest rate uas 3 ?%. <

a Amoren Corporation JJ

Maturities of long-term debt through 2003 are as follows: temporary differences reverse, was secorded along with a corre-in valuu /wncpt amoun, sponding deferred tax liability. Also, a regulatory liability, recog-1999 $202 nizing the lower expected revenue resulting from reduced income 2000 35 taxes associated with amortizing accumulated deferred investment 2001- 30 tax credits, was recorded. Investment tax credits luve been -

2002 108 deferred and will continue to be credited to income over the lives 2003 145 of the related property.

The Company adjusts its deferred tax liabilities for changes Amounts for years subsequent to 1999 do not include nuclear enacted in tax laws or rates. Recognizing that regulators will prob-a fuel lease payments since the amounts of such payments are not ably reduce future revenues for deferred tax liabilities initially currently determinable. recorded at rates in excess of the current statutory rate, reductions

- in the deferred tax liability were credited to the regulatory liability.

l Temporary differences gave rise to the following deferred tax -

- assets and deferred tax iiabilities at December 31:

laceae Taxes fygy ,, ,, ,997 Total income tax expense for 1998 resulted in an effective tax Accumulated Deierred income inxes:

rate of 40% on earnings before income taxes (38% in 1997 and 40% . Depreciation $1,036 $1,045 in 1996). Regulatory 1ssets, net 433 409 Principal reasons such rates differ from the statutory federal rate: capitalized taxes and expenses 155 176 199s 1997 1996 werred benefit costs (48) (46)

Other 12 9 5telutory federalincome tax rate: 35% 35% 35%

Total not enumulated defuted increases (Decreases) from:

'"'"'I" " "'

Depreciation differences 1 1 .1 State tax 4 4 4 .. .

Other -

(2) -

iflettive income tax rete 40% 38 % 404 Retirement Benellts In 1998, the Company adopted SFAS 132,

Employers' income tax expense components: Disclosures about Pensions and Other Postretirement 13enefits,"

in n#=u 1998 r997 1996 which resulted in revisions to the 1997 and 1996 information pre-Taxes currently payable viously reported.

(principolly federal): The Company has defined-benefit retiremmt plans covering Included in v.perating expenses $303 $261 $255 substantially all of its employees. Ilenefits are based on the included in other income - employees' years of senice and compensation. The Company's Pl ans are funded in compliance with income tax regulations and Miscellaneous, net (6) - -

'*' I"" 8 '"" **#"*

297 261 '55 AmerenUE's plans cover quahfied employees of AmerenUE as Deferred Iexes (printipelly iederel): well as certain employees of Ameren Seni es Company, another included in operating expenses - wholly-owned subsidiary of Ameren. Forawing is the pension Depreciation differences (10) (11) 2 plan information related to AmerenUE's plans as of Decemler 31.

Other (17) (7) 5 Pension costs for the years 1998,1997 and 1996, were $28 mil ,

included in other income - lion, $24 million and $28 million, respectively, of which approxi-mately 19%,17% and 19%, respectively, was charged to construc- .

Depreciation differences - -

1 tion accounts.

Other 2 10 -

(25) (8) 8 Delerted investment tax utdit amertization:

hwluded in operating expenses (8) (9) (9)

' Totalintemt tax expense $264 $244 $254 In accordance with SFAS 109,

Accounting for income Taxes,"

a regulatory asset, representing the probable recovery from cus-tomers of future income taxes which is expected to occur when i

34 1998 Annual Report I l

.4 I

funded Status of Itmion Plans: Funded Statm of Pension Plans:

In Mdlwm 1998 1997 in Mdlens

~ 1998 1997 (bangh in benefit obligation (bonge in benefit obligation Net benefit obligation at beginning of year $ 999 $ 919 Net benent obligation at beginning of year $249 $214 Service cost 24 22 Service cost 8 7

' Interest cost 70 69 Interest cost 17 16 Amendments 10 -

Amendments 5 -

Actuarial loss 38 42 Actuarial loss 8 19 Special termination benefit charge ? -

Special termination benefit charge 5 -

13cnefits paid (88) (53) 13enefits paid (7)

(31)

,, Net benefit obligation at end of year 1,060 999 Net benefit obligation at end of year 261 249 (benge in plan assets * (benge in plan assets

Fair value of plan assets at Fair value of plan assets at beginning of year 1,006 924 beginning of year 319 265 Actual retum on plan assets 122 134 Actual return on plan assets 52 38 Employer contributions 1 1 Employer contributions 5 9 Jenefits paid (88) (53) lienefits paid (31) (7)

Fair value of plan assets at end of year 1,041 1,006 Fair value of plan assets at end of year 331 319 Funded status - (excess)/ deficiency 19 (7) Funded status - excess (70) (70)

Unrecognized net actuanal gain 121 115 Unrecognized net actuarial gain 73 65 Unrecognized piior service cost (73) (69) Unrecognized prior service cost (13) (11)

Unrecognized net transition assets 6 7 Unrecognized net transition assets 2 3 Accrued pension cost of December 31 $ 73 $ 46 Propsid pension cost si December 31 $ (8) $(13)

lian auces consistpmupaly ofcommon sixk arutftmlincome secunta

Han auen consus pme pally q(common andprefe.mt sovch, bomis, momy mark tinstrumenu and realestate.

Components of Net Itriodic flenefit Cost: Components of Net irriodic 11enefit Cost:

in Mdlwns 199M 1997 1996 In Mditons 1998 1997 19 %

Service cost $24 $22 $8

$22 Service cost $7 $7 Interest cost - 70 69 65 Interest cost 17 16 13 .

Expected retum on plan assets (75) (7D (66) Expected retum on plan assets (22) (19) (16)

Amortization of: Amortization of.

Transition asset (1) (1) (1) Prior se cice costs 1 1 -

Prior service cost 6 7 7 Special termination benefit cha:ge 5 - -

Anual(gainVloss (3) (2) 1 Nel periodic benefit (ost $9 $ 5 $4 Special termination benefit charge 7 - -

Nel periodic benefil test $28 $24 $28 Weighted-average Assumptions for Actuarial Present Value of Projected llenent Obligatiom:

Weighted-average Assumptions for Actuarial 199s 1997 Present Value of Projected fienefit Obligations: Discount rate at measurement date 6 'i% 7.25 %

1998 1997 Expected retum on plan assets - 8.5% 8.5%

, Discount rate at measurement date 6.75 % 7% Increase in future compensation 4% 4.5%

Expected retum on plan assets 8.5% 8.5%

,,. Increase in future compensation 4% 4% in addition to providing pension benefits, the Company pro-

- vides cenain health care and life insurance benefits for retired AmerenCIPS' plans cover substantially all employees of employees. 'Ihe Company accrues the expected postretirement AnmenCIPS as well as certain employees of Ameren Serviws benefit costs during employees' years of service.

Company. In 1998, AmerenCIPS changed its measurement date for valuation of plan assets and liabilities to Decemtrr 31.1997 annunts have been restated to confonn to the new date. Following is the pen-sion plan information related to AmerenCIPS' plans as of December 31.

Pension costs for the years 1998,1997 and 1996 were $9 mil-tion, $5 million and $4 million, respectively, of which approxi-

. mately 19% in 1998 and 15% in 1997 and 1996 was charged to con-struction accounts.

Amoren Corporation 31 L .

%e following is information related to AmerenUE's postre- A 7mptions for the Ohligation 31easurements:

tirement benefit plans as of December 31. ,73 ,997 AmerenUE's funding policy is to annually contribute the net Discount rate at measurement date 6.75% ' 7%

periodic cost to a Voluntary Employee Beneficiary Association trust Expmed retum on plan assets 8.5% 8.5%

(VEBA). Postretirement benefit costs were $43 million for 1998 hiedical c st trend rate - initial 5.75% 7%

and $44 million for both 1997 and 1996, of which approximately

- ultimate 4.75% 5%

17% was charged to construction accounts in 1998 and 1997, and 19% in 1996. AmerenUE's transition obligation at Decemtrr 31, Ultimate medical cost trend rate 1998 is being amortized over the next 14 years. expected in year 2000 2000 The bloPSC and (he ICC allow the recovery of postretirement ,

benefit costs in rates to the ertent that such costs are funded. In A 1% increase in the medical cost trend rate is estimated to December 1995, AmerenUE established two extemal trust funds for increase the net periodic cost and the accumulated postretirement -

retiree health care and life insurance benefits. In 1998,1997 and benefit obligation approximately $4 million and $29 million, ,

1996, claims were paid out of the plan trust funds. respectively. A 1% decrease in the medical cost trend rate is esti-mated to decrease the net periodic cost and the accumulated Funded Status of the Plans: postretirement benefit obligation approximately $4 million and $29 f, ug,, ,, ,997 million, respectively.

De f Il Wing is information related to AmerenCIPS' postre-(benge in benellt obligation tirement benefit plans as of December 31.

Net benefit obligation at beginnm.g of year $333 $311 AmerenCIPS' funding policy is to fund the two VEBAs and the Service cost 14 12 401(h) account established within the AmerenCIPS retirement Interest cost 24 23 income trust with the lessor of the net periodic cost or the amount Actuarial loss 9 5 deductible for federal income tax purposes. In 1998, AmerenCIPS Benefits paid (20) (18) changed its measurement date for valuation of plan assets and lia.

bilities to December 31,1997 amounts have been restated to con-Net benefit obligation at end of year 360 333 form to the new date. Following is the postretirement plan infor-mation related to AmerenCIPS' plans as of December 31.

g g ,

Postretirement benefit costs were $6 million for 1998, $12 mil-Fair value of plan assets at lion for 1997, and $16 million for 1996, of which approximately beginning of year 81 47 20% was charged to construction accounts in 1998,17% in 1997, Actual retum on plan assets 8 9 and 15% in 1996. AmerenCIPS' transition obligation at December Employer contnbutions 44 44 31,1998 is being amortized over the next 14 years.

Unincorporated business income tax (3) (1) The ICC allows the recovery of postretirement benefit costs in Benefits paid (20) (18) rates to the extent that such costs are funded.

Fair value of plan assets at end of year 110 81 ,

l i

Funded status - deficiency 250 252 j Unrecognized net actuarial gain 11 18 {

Unrecognized prior service cost (3) -

Unrecognized net transition obligadon (175) (187)

Pestratirement besellt ll6bility of December 31 $ 83 $ 83

1%n assets consistpnncipally ofcomonon stotks andJhed income securmes. ,

4 Components of Net Periodic Benefit Cost: ,

in Millwns 19M 1997 1996 Service cost $ 14 $ 12 $ 12 Interest cost 24 23 22 Expected retum on plan assets (5) (2) (1)

Amortization of: .

Transition obligation 12 12 12

" Aduarial gain (2) (1) (1) llel perledic benefit test $ 43 $ 44 $ 44 36 1998 Annual Report

r T

e 17unded Status of the Plans: "" " ' '

In Mdlwru lYM 1997 (hange in benefit obligation Stock Option Plans Net benefit obligation at beginning of year $140 $139 In 1998, the Company adopted a long-term incentive plan Senice cost 3 4 (the Plan) for eligible employees, replacing the plan previously in Interest cost 10 10 place at AmerenUE. The Plan provides for the grant of options, Actuarial (gain)/ loss 4 (9) perfonnance awards, restricted stock, dividend equivalents and Benefits paid (5) (4) stock appreciation rights. Under the terms of the Plan, options Net benefit obligation at end of year 152 140 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 (hange in plan essels'

,' period of five years, beginning at the date of grant, and provide for Fair value of plan assets at beginning of year 115 88 acceleration of exercisability of the options upon the occurrence of Actual return on plan assets 16 20 certain event.3, including retirement. Outstanding options expire Employer contributions 4 12 on various dates through 2008. Under the Plan, subject to adjust-401(h) transfer (2) (1) ment as provided in the Plan, four million shares have been autho-Benefits paid (5) (4) rized to be issued or delivered under the Company's plan. In Fair value of plan assex at end of year 128 115 accordance with APB 25, no compensation cost has been recog-nized for the Company's stock compensation plans. In 1996, the Funded status - deficiency 24 25 Company adopted the disclosure-only method of fair value data Unrecognized net actuarial gain 58 63 under SfAS 123, " Accounting for Stock-Ba:cd Compensation. If Unrecognized net transition obligation (76) (84) the fair value-based accounting method under this statement had Postratirement benslit liability been used to account for stock-based compensation cost, the of December 31 $ 6 $4 effects on 1998,1997 and 1996 net income and earnings per share

nan anea curuutprtncpaly q(common andpre)tmd sixks, boruts, money would have been immaterial.

mar *et ourmments umi nut esia*

The following table summarizes stock option activity during 1998,1997 and 1996:

Components of Net periodic lienetit Cost:

ipf in Ahllwra 1998 1997 lYXi ggy Service cost $3 $4 $4 A Interest cost 10 gdg 10 11 sham twce Expected rerum on plan assets (8) (5) (4) Outstanding at beginning of year 4 % ,070 $39.24 Amortization of: Granted 700/00 39.25 Transition obligation 5 5 6 Exercised 72,390 36.81 Actual gain (4) (2i (1) Cancelled or expired 28,097 39.28 liel perictlig benefit cost $6 $12 $16 Outstanding at end of year 1,096,183 39.41 Assumptions for the Obligation Measurements:

19 % 1997

,997 y Discount rate at measurement date 6.75% 7.25 %

g.jg g.,gg Expected return on plan assets 8.5% 8.5% A=w A e we Medical cost trend rate -initial Emu E m ue 5.75% 8.5% S3am mc, 53,m fnc,

- ultimate 4.75% 5.5% Outstanding at

,, Ultimate medical cost trend rate beginning of year 307,390 $39.71 142,500 $35.87 expected in year 2000 2000 Granted 195,880 38.50 165,590 43.00 Exercised - - - -

A 1% increase in the medical cost trend rate is estimated t Cancelled or expired 7,200 39.56 700 35.88 increase the net periodic cost and the accumulated postretirement benefit obligation approximately $2 million and $22 million, Outstanding at end of year 4 % ,070 39.24 307,390 39.71 respectively. A 1% decrease in the medical cost trend rate is esti. Exercisable at end of year 134,785 38.55 39,710 38.86 mated to decrease the net periodic cost and the accumulated postretirement benefit obligation approximately $2 million and $22 million, respectively, Amoren Corporation 37

. g .

Additional information abcut stock options outstanding at lion restructuring payment to the supplier, which allowed it to pur-December 31,1998: chase at market price.5 low-sulfur, non-Illinois coal through the sup-plier (in substitution for the high-sulfur Illinois coa 1 the Corr.pany j mgbthage nercse mce o,astanding shares n/e nam) Everchable shares was obligated to purchase under the original contract); and would ,

$35.50 800 66 400 receive options for future purchases of low-sulfur, non-lllinois coal ]

35.875 87,275 6.3 41,275 from the supplier through 1999 at set negotiated prices.

15,480 15y swithing to low-sulfur coal, the Company was able to dis.

38.50 177,190 8.1 e ntinue operating a generating stati n scrubber. ne tenefits of the 39.25 665,850 9.3 46,200 restructuring include lower cost coal, avoidance of significant capital 39.8125 5,300 9.5 -

expenditures to renovate the scrubirr, and elimination of scrubler . 1 43.00 159,768 7.1 71,301 operating and maintenance costs (offset by sembber retirement expenses). %e net benefits of restructuring are expected to exceed The fair values of stock options were estimated using a $100 million through 2007. In December 1996, the ICC entered an .

binomial option-pricing model with the following assumptions: order approving the switch to non-111inois coal, recovery of the restructuring payment, plus associated carrying cmts (Restructuring T' ' " "" # ' "" '

Grant Sue in s ne Optwn Term bpected Volarshty Du n wid six years, anJ continued recoverv in rates of the undepreciated scrub-6/16/98 5.63 % 10 years 17.68 % 6.55%

ber investment plus costs of removal. Additionally, in May 1997 the 4/28/98 6.01% 10 years 17.63% 6.55%

FERC approved recovery of the wholesale portion of the 2/10/97 5.70 % 10 years 13.17 % 6.53 %

Restmduring Chages emugh the wholesale FAC. As a result of the 2/7/% 5.87 % 10 years 13.67 % 6.32%

ICC and FERC orders, the Company classified the $72 million of the Restructuring Charges made to the coal supplier in Febmary 1997 as re8"'>> <v e' "a '*, "8" oe< se< >997 <ee ve<<a ev< x>-

0IE~ 2 mately $10 million of the Restructuring Charges through the retail Commitments and Contingencies FAC and from wholesale customers.

The Company is engaged in a capital program under which A group of industrial customers filed with the Illinois Third expenditures averaging approximately $488 million, including District Appellate Coun (the Coun) in February 1997 an appeal of AFC, are anticipated during each of the next five years. This esti- the December 1996 order of the ICC. In Dvember 1997, the Court mate includes capital expenditures for the purchase of six new reversed the ICC's December 1996 order, finding that the combustion turbines (cts), as well as expenditures which will be Restruduring Charges were not direa costs of fuel that may be incurred by the Company to meet new air quality standards for recovered through the retail FAC, but rather should be considered ozone and particulate n.atter, as discussed later in this Note. as a part of a review of aggregate revenue requirements in a full

'the Company has commitments for the purchase of coal rate case. Restructuring Charges allocated to wholesale customers under long-term contracts. Coal contract conunitments, including (approximately $7 million) are not in question as a result of the transportation costs, for 1999 through 2003 are estimated to tctal opinion of the Court. In December 1997, the Company requested

$1.6 billion. Total coal purchases, including transportation costs, for a rehearing by the Cc, art; that request was denied. Ilowever, the 1998,1997 and 1996 were $%7 million, $547 million and $589 mil- Court did rule that all revenues collected under the retail FAC in lion, respectively. The Company also has existing contracts with 1997 would not have to be refunded to customers. The Company pipeline and natural gas suppliers to provide, tmnsport and store filed an appeal with the Illinois Supreme Court. In Decemtwr natural gas for distribution and electric generation. Gas-related con- 1998, the Supreme Court issued its decision, reversing the Court's tract cost commitments for 1999 through 2003 are estimated to total opinion and affirming the ICC's order. The Supreme Court held

$116 million. Total delivered natural gas costs were $119 million that the Restructuring Charges are recoverable through the retail for 1998 and $161 million for both 1997 and 1996. The Company's FAC. No further proceedings are anticipated.

nuclear fuel commitments for 1999 through 2003, including urani- The recoverability of the Restructuring Charges under the +

um concentrates, conversion, enrichment and fabrication, are retail FAC in Illinois was also impacted by the Law. Among other ,

~

expected to total $107 million, and are expected to be financed things, the law provides utilities with the option to eliminate the under the nuclear fuel lease. Nuclear fuel expenditures for 1998, retail FAC and limits the ability of utilities to file a full rate case for .

1997 and 1996 were $20 mil! ion, $35 million and $51 million, its aggregate revenue requirements. After evaluating the impact of respectively. Additionally, the Company has long-term contracts the law on the future recoverability of the Company's Restructuring with other utilities to purchase electric capacity. These commit- Charges through future rates, the company wrote off the unamor-ments for 1999 through 2003 are estimated to total $203 million. tized balance of the Illinois retail portion of its Restructuring Charges During 1998,1997 and 1996, electric capacity purchases were $38 as of December 31,1997 ($34 million, net of income taxes 1 See million, $36 million and $45 million, respectively. Note 2. Regulatory Matters for further information. ;

During 1996, the Company restructured its contract with one of its major coal suppliers. In 1997, the Company paid a $70 mil-I l

J8 1998 Annual Report

4 e

The Q)mpany's insurance coverage for Callaway Nuclear future financial condition, results of operations or liquidity.

Plant at December 31,1993 was as follows: In an attempt to lower ozone levels across the eastern United States, the EPA issued final regulations in September 1998 pertain-lype aruf Soterre of Corvruge ing to NOx emissions from coal-fired boilers and other sources in Aranmum 22 states, including Missouri and Illinois (where all of the

,_ g]"g'8 Company's coal-fired power plant boilers are hicaten Although in aidhom carrges inculents reduction requirements in NOx emissions from the Company's Public 1.iability: coal-fired boilers are anticipated to exceed 75% from 1990 levels American Nuclear Insurers 5 200 $- by the year 2003, it is not yet possible to determine the exact mag-Pool Participation 9,602 nitude f the reductions required from the Company's power 88 (a) g ggg plants because each state has up to one year to develop a plan to S

Nuclear Worker Liability:

comply with the EPA rule. The NOx emissions reductions already xhieved on several of the Company's coal-fired power plants will American Nuclear Insurers $ 200 (c) $3 help to reduce the costs of compliance with this regulation.

Property Damage:

llowever, preliminary analysis of the regulations indicate that Nuclear Electric insurance Ltd. $2,750 (d) $13 sekctive catalytic redudion technology will be required for some Replacement Power: of the Company's units, as well as other additional controls.

Nuclear Electric Insurance Ltd. $ FAI(e) S3 Currently, the Company estirnates that its additional capital ra> Retro,gruepremtum umler tbe rree-Amknon habihtyprestons ofsbe expenditures to comply with the EPA's final regulations issued in Atomsc Erwrgy Act of19% as ameruk4 (IWe-Aruk rsun) Subtert k> kWmW WN, MU Mge kn U% m%% W 0% dion ovn retrupects,e m3essment uitb res/wt k) lassfrom an facukut as any US the period from 1999 to 2002. Associated operations and mainte-reaaur. payable ai slo malumper3mr price-Amkrson egsres in m (b) Ltma rf habdayfur satb inciamt umler IWe-Amkrum. nance expenditures could increase $10 million to $15 million annu-tc) Im4atry hmitforpotentud habihty/ rum uoreers clasmeng eiposure to rbe ally, beginning in 2003. The Company will explore altematives to bazard rf nuc4ur radiation. comply with these new regulations in order to minimize, to the he) 'a$kt n$nfrft$m"t$mj$unks a beb somurwnces after thefurst '" Y' # "W " *N W#"8 "P**'

17 uwknfan outage, pIm JJ et mdhonper ev'rkfar IG1 uwks theregler Company is unable to predict the ultimate impact of these standards

"" "'"" 0"*"#I*' ' " ' "9" Price-Anderson limits the liability for claims from an incident """*"."P"'**

In November 1998, the United States signed an agreement with involving any h. censed U.S. nuclear facility. The limit is based on numerous other countries (the Kyoto ProtocoD containing certain the number of licensed reactors and is adjusted at least every five years based on the Consumer Price Index. Utilities owning a med so which would require decreases in green-house gases in an effort to address the *gkibal warming" issue. The nuclear reactor cover this exposure through a combination of pri-Kyoto Protocol must be ratifieri by the United States Senate before vate insurance and mandatory participation in a financial protec-pmvisions are effective for the United States. Until ratification is tion pool as estabhshed by Price-Anderson.

If losses from a nuclear incident at Callaway exceed the h.m- obtained, the Company is unable to predict what requirements, if its of, or are not subject to, insurance, or if coverage is not avail- any, will be adopted in this country; however, implementation of the Kyoto Protocol in its present fonn would likely result in signif-able, the Company will self-insure the nsk. Although the Company has no reason to anticipate a serious nuclear mcident, if one did idy higher capital costs and operations and maintenance expenses by the Company. At this time, the Company is unable to occur it could have a material but indeterminable adverse effect on determine the impact of these proposals on the Company's future the company's financial position, results of operations or hquidity.

Under Title IV of the Clean / ir Ad Amendments of 1990, the financial condition, results of operations or liquidity.

Company is required to significat.dy reduce total annual sulfur As of December 31, 1998, the Company's utility operating dioxide (S02) and nitrogen ext - ' Ox) emissions by the year subsidiaries were designated as potentially responsible parties (PRP) by federal and state environmental protection agencies at

, 2000.11y switching to low-sulfur cu. . early banking of emissions five hazardous waste sites. Other hazardous waste sites have been credits and installing low NOx bur ter technology, the majority of

. these reductions have been achieved. identified for which the Company may be responsible but has not been designated a PRP.

In July 1997, the United States Erwironmental Protection Agency (EPA) issued final regulations revising the National Ambient Costs relating to studies and remediation and associated legal Air Quality Standards for ozone and particulate matter. The new and litigation expenses at the sites kicated in Illinois are being g gg g ambient standards rnay result in additional significant reductions in ery through rates. Through December 31,1998, the total of the costs SO2 and NOx emissions tiam the Company's power plants. The deferred, net of recoveries from insurers and through envimnmental new particulate matter standards may require SO2 regluctions of up adjustment clause rate riders appmved by the ICC, was $12 million.

to 50% beyond that already required by Phase 11 acid rain control .

provisions of the 1990 Clean Air Act Amendments and could be The ICC has instituted a reconciliation proceeding to review required by 2007. The full details of these requirements are under I" "P#"N #" * * " " "" * * " * * *

. through 1997 and to determine whether the revenues collected study by the Company. At this time, the Company is unable to pm-from customers under its envirorunental adjustment clause rate rid-dict the ultimate impact of these revised air quality standards on its Ameren Corporation 39

l

. g .

ers were consistent with the amount of remediation costs prudent- proceedings before various courts and agencies with respect to ly and properly incurred. Amounts found to have been incorrect- matters arising in the ordinary course of business, some of which ly included under the riders would be subject to refund. Rulings involve substantial amounts. The Company believes that the final from the ICC are still pending with respect to these proceedings disposition of these proceedings will not have a material adverse applicable to the years 1993 through 1996. The reconciliation pro- effect on its financial position, results of operations or liquidity.

ceedings relating to the Company's 1997 environmental remedia-tion activities were commenced in April 1998, but have not yet been submitted to the ICC for a decision.

y" n .

Q U

The Company continually reviews remediation costs that may Callaway Nacleor Plant be required for all of these sites. Any unrecovered environmental

Under the Nuclear Waste Policy Aa of 1982, the Department costs are not expected to have a material adverse effect on the of Energy (DOE) is responsible for the permanent storage and dis- '

Company's financial position, results of operations or liquidity. posal of spent nuclear fuel. The DOE currently charges one mill In 1998, the Company comn'itted to purchase six new CT per nuclear-generated kilowatthour sold for future disposal of spent peaking units. The Gs will add over 700 megawatts to the fuel. Electric rates charged to customers provide for recovery of Company's net peaking capacity and are expected to cost approx- such costs. De DOE is not expected to have its permanent stor-imately $260 million. Bree of the Gs are expected to be installed age facility for spent fuel available until at least 2015. The Company in 2000, and the remaining three in 2001.

has sufficient storage capacity at the Callaway site until 2004 and is The International Union of Operating Engineers Local 148 and pursuing a viable storage ahernative. This attemative has been the International Brotherhood of Electrical Workers local 702 filed appmved by the Nuclear Regulatory Commission, and when imple-unfair labor practice charges with the National labor Relations mented, will provide sufficient spent fuel storage for the licensed Board (NLRB), relating to the legality of the 1993 lockout of both life of the plant. The delayed availability of the DOE's disposal unions by AmerenCIPS. We NLRB issued complaints against facility is not expected to adversely affect the continued operation AmerenCIPS conceming its lockout. Both unions sought, among of Callaway Plant.

other things, back pay and other benefits for the period of the k)ck-Electric rates charged to c stomers provide for recovery of out. At that time, the Company estimated the amount of track pay Callaway Plant decommissionirg costs over the life of the plant, and other benefits for both unions to be approximately $17 million.

based on an assumed 40-year life, ending with expiration of the in May 1996, an administrative law judge of the NLRB ruled that the plant's operating license in 2024. The Callaway site is assumed to kickout was unlawful. In July 1996, the Company appealed to the be decommissioned using the DECON (immediate dismantlement)

NLRB. In August 1998, a three-member panel of the NLRB reversed method. Decommissioning costs, including decontamination, dis-the administrative law judge's decision and ruled that the lockout mantling and site restoration, are estimated to be $485 million in was lawful. Both unions filed motions for review with the NLRB current year dollars and are expected to escalate approximately 4%

asking for reconsideration of this decision. In December 1998, the per year through the end of decommissioning activity in 2033 NLRB denied the unions' motions for reconsideration. Decommissioning costs are charged to depreciation expense over Subsequently, in Decernher 1998, the unions filed a joint motion for Callaway's service life and amounted to $7 million in each of the a rehearing of their motions for reconsideration. De NLRB has not years 1998,1997 and 1996. Every three years, the MoPSC requires ruled on this latest motion The Company continues to believe that the Company to file updated cost studies for decommissioning the lockout was both lawful and reasonable and that the final res-Callaway, and electric rates may be adjusted at such times to reflect olution of the dispute will not have a material adverse effect on its changed estimates. %e latest study was filed in 1996. Costs col-financial position, results of rperations or liquidity.

lected from customers are deposited in an external trust fund to Certain employees of the Company are represented by the provide for Callaway's decommissioning. Fund earnings are International Brotherhood of Electrical Workers and the expected to average 9.25% annually through the date of decom-International Union of Operating Engineers. These employees com- missioning. If the assumed return on trust assets is not earned, the prise approximately 70% of the Company's workforce. %e collec-Company believes it is probable that such earnings deficiency will tive lxtrgaining agreements covering 98% of these represented

be recovered in rates. Trust fund earnings, net of expenses, appear employees expire in July 1999. Prehminary discussions with these on the consolidated balance sheet as increases in the nuclear ,.

collective bargaining units are currently underway. At this time, the deconunissioning trust fund and in the accumulated provision for Company is unable to predict the impact of these negotiations on its

nuclear decommissioning.

future financial condition, results of operations or cash flows.

%e staff of the SEC has questioned certain current accounting Regulatory changes enacted and bung considered at the fed-practices of the electric utility industry, regarding the recognition, mea-eral and state levels continue to change the structure of the utility surement and classification of decommissioning costs for nuclear gen-industry and utility regulation, as well as encourage increased com- erating stations .in the firancial statements of electric utilities. In petition. At this time, the Company is unable to predict the impact response to these questions, the Financial Accounting Standards of these changes on the Company's frure financial condition, Board has agreed to review the accounting for removal costs, includ-rasults of operations or liquidity. See Note 2 - Regulatory Matters ing decommissioning. The Company does not expect that changes in for further information.

the accounting for nuclear decommissioning costs will have a mater-The Company is involved in other legal and administrative ial effect on its financial position, results of operations or liquidity.

l l

l 40 1998 Annual Report 1

yA'[ 'j' Costs and fair values of investments in debt and equity secu-nU L rities in the nuclear decommissioning trust fund at December 31 Felt Valse ef Fisenclel lastrsmenf: were as follows:

The following methods and assumptions were used to esti- inun Atateons anm varmamt nute the fair value of each class of financial instruments for which swuniv ng cmi cant um) Fa,r uvue !

it is practicabb to estimate that value.

Debt securities $48 $4 $- $ 52 Cash and Temporary Intestments/Short Term Borrvu ings Equity securities 46 62 -

108 The carrying amounts approximate fair value because of the Cash equivalents 2 - -

2

, short-term nuturity of these instruments. 5% $66 $- $162 3Iarketable Securitles t997in awwns

,* cnus enruhud The fair value is based on quoted market prices obnined from g

%,gg c,,, g 7,, ng,,

e dealers or mvestment managers.

mbt securities $34 $3 $- $ 37 Nuclear Decommissioning Trust fund y quggy seeur;g;e, 43 49 _

g3 The fair value is estimated based on quoted market prices for Cash equivalents 2 - -

2 securities.

$79 $43 $- $122 Pnferrvd Stock ofSubsidiaries The fair value is estimated based on the quoted market prices for the same or similar issues. The contractual maturities of investments in debt securities at December 31,1998 were as follows:

tangTerm Debt

,,g ( ,, ,,,

The fairvalue is estinuted based on the quoted market prices for same or similar issues or on the current rates offered to the I Y ' $ Y##'8 $3 $3 Company for debt of comparable maturities. 5 years to 10 years 21 22 Due after 10 years 24 27 Carrying amounts and estimated fair values of the Company's

$48 $52 financial instruments at December 31:

19 % 19 % 1997 1997 in Stahons Carryng Farr Carrying Fatr 0..

Amount %due Amount %due $q gggllglggggllgg Marketable securities $ 14 $ 14 $ 32 $ 32 In 1998, the Company adopted SFAS 131, " Disclosures about Preferred stock 235 235 235 214 Segments of an Enterprise and Related Information." Ameren's Long-term debt princip i business segment is comprised of the two regulated util.

- (including current portion) 2.491 2,659 2,558 2.692 h perating mmpan s that p%e dedric and gas wde in portions of Missouri and 11hnois. The other reportable segment The Company has investments in debt and equity securities includes the non-regulated subsidiaries, as w; ell as the Company's 60% interest in Electric Energy, Inc.

that are held in trust funds for the purpose of funding the nuclear decommissioning of Callaway Nuclear Plant (see Note 13 - * *CC"#"8 E #8 #8#8***** **** *8 I

Callaway Nuclear Plant). 'Ihe Company has classified these invest. described in Note 1. Summary of Significant Accounting Poh.oes.

ments in debt and equity securities as available for sale and has Segment data includes intersegment revenues, as well as a charge all cating costs of admmistrative support services to each of the recorded all such investments at their fair market value at December 31,1998 and 1997. In 1998,1997 and 1996, the proceeds Perating companies, These costs are accumulated in a separate from the sale of investments were $29 million, $24 million and $20 subsidiary, Ameren Services Company, which provides a variety of ,

million, respectively. Using the specific identification method to supp rt services Ameren and its subsidiaries. The Company 4 . determine cost, the gross realized gains on those sales were evaluates the performance of its seg aents and allocates resources approximately $2 million for both 1998 and 1997 and $1 million for t them, kW m raemes, operaung bcome aM wt income 1996. Net realized and unrealized gains and losses are reflected in the accumulated provision for nuclear decommissioning on the consolidated balance sheet, which is consistent with the method used by the Company to account for the decommissioning costs recovered in rates.

Amoren Corporation 41 4,. .

. s l

The table below presents information about the reported rev. Specified items related to segment assets as of December 31:

enues, operating income, net income and total assets of Ameren Corporation for the years en&d December 31: Ivwin Malums RexuAual t rd,tus Allt;rber Tsa!

Expenditures for additions Axukunt #woncannu to long-lived assets $290 $31 $321 IVM in ML'lums Utdsstes All other items Taal Revenues $3,230 $190 $t102f $3,318 ;997,, yg,,,,

Operating income 548 21 2 571 Expenditures for additions Net income 380 6 -

386 to long-lived assets $375 $6 $381 Total assets 8,594 237 16 8.847 ,,

1997in Mdhons

$3,139 Expenditures for additions Revenues $243 $ (SSP $3,327 t I ng-lived assets $432 $4 $436 .

Operating income 551 31 -

582 Net income 321 14 -

335 Total assets 8,591 243 (6) 8.828 lYXiin Mdlwu Revenues $3,141 $235 $ (48f $3,328 Operating income 545 31 -

576 Net income 358 14 -

372 Total assets 8,666 272 (5) 8,933

Ehmination v{ intercompany menues Specified items included in segment profit / loss for the years ended December 31:

!Y M in Mdlwru Regulated itduws Total All othe_r Interest expense $170 $ ~> $1'9 Depreciation, depletion and amortization expense 334 14 348 income tax expense 263 5 268 1997in Mdlwns Interest expense $168 $10 $178 Depreciation, depletion and amortization expense 331 15 346 Income tax expense 226 8 234 Extraordinary items (52) -

(52)

IVM5 in Mdlums Interest expense $164 $9 $173 Depreciation, depletion and amortization expense 323 16 339 Income tax expenn 245 8 253 1

I l

42 1998 Annual Report

t.

~. , .

Colootod 0 0 0 0 011 d c t 0 0 F 11:0 0 0 010 I I Q f o r m Q t h 9 50 Mullunss qfikAun Ewep 5htr, andpy $barr Anwis and Ratus 19%I 1997 19 % 1991 19 % 1993 Results of dperellens twena,aiwe=&y31.

Operating revenues $3,318 $3,327 $3,328 $3,236 $3,270 $3,272 Operating expen.ses 2,747 2,744 2,752 2,658 2,685 2,724

- Operating income 571 582 576 578 585 548 incone before extraordinary charge 386 387 372 373 391 369 Extraordinary charge, net of income taxes -

52 - - - -

. Net income 586 335 372 373 391

369 Average common shares outstanding . 137,215,962 137,215,462 137,215,462 137,215,462 137,253,617 137,254,771

, Assets, Obligations sad Equity Capitel are, &,31, Total assets $8,847 $8,828 $8,933 $8,788 $8,629 $8,546 Long-term debt obligations 2,289 2,506 2,335 2.373 2,413 2,301 Preferred stock subject to -

nundatory redemption - -

1 1 1 1 Preferred stock not subject to mandatory redemption 235 235 298 298 298 296 Common equity 3.056 3,019 3,016 2,971 2,917 2,840 Finesciel indice m,renseansema<3i.

Earnings per share of common stock before extraordinary charge $2.82 $2.82 $2.71 $2.72 $2.85 $2.69 Extraordinary charge, net of income taxes -

$C38) - - - -

Eamings per share of common stock (based on average shares outstanding) $2.82 $2.44 $2.71 $2.72 $2.85 $2.69 Dividend payout ratio 90% 974 88 % 86% 80% 83%

Return on average common stock equity 12.82% 11.14 % 12.51% 12.76% 13IG4 13.18%

Ratio earnings to fixed charges AmerenUE 4.99 4.70 4.68 4.78 4.68 4.66 AmerenOPS 4.13 3.64 4.30 4.41 4.93 4.82 Ikok value per common share $22.27 $22.00 $21.98 $21.65 $21.25 $20.69 (spitellastion Relies are=&y31, .

Common equity SL8% - 52.4 % 53.4 % 52.6% 51.8% 52.2%

Preferred stock 4.2 4.1 5.3 5.3 5.3 5.5 tong-term debt 41.0 43.5 41.3 42.1 42.9 42.3 100.0 % 100.0 % 100.0 % 100.0 % 100.0% 100.0%

e Amaren Corporation 43 b.... .. . . . . . . . _ . . . .. . . . . . .

y -

e ., .

EIOGtrio @ D o r n i c o 0 t 0 t 10110 0 Year EndalDn ember 31, 1998 1997 1996 1995 1994 1993 Electric Operating Wevesses araians ,

Residential $1,125 $1,064 $1,070 $1,073 $1,014 $1,037 Conunercial 966 927 920 906 884 861 Industrial 511 500 500 496 487 486 Tholesale 91 9' 91 87 84 81 Other 23 24 28 28 22 28 Native 2,716 2,606 2,609 2,590 2,491 2,493 Interchange 240 224 280 230 243 254 .

EE1 152 207 198 201 276 251 ,

Miscellaneous 29 47 22 20 20 18 Credit to customers (43) (20) (47) (33) - -

$3,062 $3,030 $3,016 '

ToIeI ilectric 0pereting Reveaees $3,094 $3,064 $3.008 Milewetthest Sales Arations Residential 15,188 14,325 14,418 14,086 13,282 13,636 Commercial 15,555 14,990 14,872 14,464 14,413 13,642 Industrial 11,582 11,404 11,191 10,971 10,728 10,407 Tholesale 2,446 2,3;.3 2,328 2,248 2,137 2,088 Other 303 317 305 316 301 317 Native 45,074 43,359 43,114 42,085 40,491 40,090 Interchange 8,075 9,402 10,768 8,176 8,080 10,326 EEI 8,296 11,220 10,554 10,850 14,594 12,521 letal KllewatIhaer $eIes 61,445 63,981 64,436 61,111 63.165 62,937 Electric (estemers Endo /nwr Residential L289,543 1,282,042 1,275,534 1,267,976 1,258,757 1,248,723 Commercial 181,678 180,206 176,621 173,810 171,072 168,566 Industrial 5,926 6,554 6,660 6,782 6,750 7,137 Tholesale 18 21 20 21 21 21 MisceDaneous 2,193 2,381 2,398 2,434 2,406 2,407 ToIeI (lectric (asieaers 1,479,363 1 471,20i 1,461,233 1,451,023 1,439,006 1,426.854 Residential (sstemer Dets Aremge Kilowatthours used 11,986 11,215 11,354 11,152 10,606 10,946 Annual electric bill $873.28 $833.34 $842.82 $849.62 $809.27 $832.46 Revenue per kilowatthour 7.29( 7.38c 7.30c 162c 7.63e 7.61e Gross lastantaneess Peak Demand aregauwm .

AmerenUE 8,429 8,055 8,085 7,%5 7,430 7,540 l AmerenCIPS 2,163 1,923 1,892 1,940 1,854 1.848 (spobility et Time el Peak, lacludlag Net Perchases and Sales arm artu ,

Ame cnUE : 9,027 8,950 9,120 8,714 8,469 8,597 AmerenCIPS 2,417 2,491 2.519 2,489 2,510 2,439 :

Camerating (spebility at Time of Peck argauoru .

Amen nUE 8,282 8,279 7244 8,184 8,057 7,%3 AmerenCIPS 3,040 3,033 3.033 3,018 3,018 2,901

. (e sl 8erad n,m ~22,959.000 21,392,000 20,062,000 17,715,000 16,885,000 14,879,000

. Price yer Tee et (eei Aterage $21.29 $23.54 $25.25 $26.86 $28.02 $33.36 Sesrce el f aergy $spply anent Coal . 83.5 % 83.8% 79.6 % 76.3% 76.2% 70.7 % '

Naclear 17,7 19.3 19.2 18.3 23 0 19,5 I

Hydro ' 3.8 2,7 2.8 3.6 3.9 4.6

. Pucchased, net (5.0) (5.8) (1.6) 1.8 (3.1) 5.2 100.0% 106 4 100.0 % 100 0% 100D4 100.0 %

v 44 1998 nnual Report

F e ,, O 0 0 0 '.G o o r a t i c o S t a t i o s t a o YearEndallkcemberJ1 1998 1997 19txi 1995 1994 1993 l Noter,al Ges Operating Revenues Itainms.

Residential $135 $150 $161 $137 $138 $153 Commercial 50 55 61 51 53 58

. Industrial - 19 22 21 18 24 22 L Off system sala 3 13 - - - -

Miscellaneous '

_ 10 10 11 11 10 12 ,

Total Noteral Gas Operating Revesses ,J7 $250 $254 $217 $225 $245 l a

MMits $sles usum, Residential ' 21 43 27 24

, 23 26 j

- Commercial. 8 9 11 lu 10 10 l Industrial 6 6 5 5 6 6

,- Off system sales 1 5 - - - -

! Total MMBts $sles 36 43 43 39 39 42 Natural Gas Customers endogear l Residential 265,405 263,588 260,989 257,848 254,328 251,171 Commercial 30,245 30,147 29,911 29,446 29,037 28,676 industrial 407 412 402 378 351 307 ToIei Neiersi Gss (esiemers 296,057 294.147 291,302 287.672 283,716 280,154 1

I I

f.

e-1 -

Amoreis Corporation 4i

o .

Gmoroo GorporatIGC 000 OODoIGlorloo OfflOOro 00G OIractoro 0IfIcers Ameren Sen#cs RIOtARn A. LtwKIN '

" ~

PAtTL A. AGAlHEN

' a Amen >n Girporation Senior Vice President, Energy Supply Ser ices ; [ [l n ,

OlARI.ES W. MlTurn M. PATRK3A lhRRITr p ,,..,,

Chairman. President and Chief Vice President, Corporate Communications Retired Chainnac and Chief Executive Executive Officer CliAkt.Es A. IIREMER Officer - Boatmen's Trust Company DONAm E. BRANIYT Vice President, infonnation $crvices Senior \ ice President, Finance DONAm W. CAPONE Principal - Ilanne Merriman Associates, Snytx R. StmvAN Vice President. Engineering & Construction a retail business consulting firm l Vice President, General Counsel

pMMY L De Pm L Mm K 2 I and Secretary i Vice President, Gas Support Presiderst and Chief Executive Officer - .

WARNER L llAxTER P.L. Miller and Associates, a management J uN M. H wNis ,

Vice President and Controller Vice President, iluman Resources C' *ing finn JERRE E. IliRosoNG R. AtAN KrarY h E MlWR '

Treasurer President, Chief Executive Officer and Vice President, Energy Supply Chairman of the Board - Ameren Corporation A mer.en t 7,~ MicnArt J. mon 1 ANA Vice President, Supply Services

~

RoHERT ll. QlTNoN OtARu3 J. SOll*KAr Retired Chairman of the Board - Peabody Senior Vice President, Customer Services CRAIG D. Nil. son 1-lolding Company, Inc Vice President, Merger Coordination TimAM J. CARR and Regulatory Planning IIAR\TY SAIKE '

Vice President, Customer Sernces - Regional Retired Managing Partner - Cynwyd SAMin E. Wims Investments, a real estate partnership GARRY L RANuount V ce Pre 3ident, Industrial Relations V. President, Nuc: ar Operations CHARLFS J. SCHL'KAl '

RONAm C. ZoruAR Senior Vice President, Customer Services -

1 IRTJ. SCHl'KAl yjce president, Customer Services - Amerenet

..ce Prer,ident, Power Plants Div s on Support WimAM C. SuoRt3 M* bu* **

President - J,tnet McAfee, Inc., a Vice President, Customer Servicts - AmerenEneml, res dential real estate company Metropolitan JpMrs F. 4 ummots y ggg g,

"' " "E Retired Vice Ch inran - Caterpillar, Inc.

A merenGPS Lrsur Mc.Nrw j g; g m,,g,,,,,

GARY L RmwATER Vice President, Risk Management ; m,gm gnfmgo,mmmw President and Chief E,xecutive Officer JAMES T. IllRKFIT Vice President, Power Operations Adnson to the lhtrd Board of Directors GiuirRT W. MooKM AN OtARu3 J. DotrutR1T Vice President, Regional Operations Retired Chairman and Chief Executive A. meren Corporation TuoMAs R. Voss Officer - Union Electric Company Vice President, Regional Operations WimAM E. CoRNrutts '

Ret: red Chairman and Chief Executive Officer - TuoMAs 11. J AconsrN Union Electric Company Chairman, Pret,ident and Chief Executive CulToRD L GREFNwALT i Officer - Mercantile Bancorporation Inc.,

Retired President and Chief Executive Officer - a bank holdmg company CIPSCO Incorporated THOMAS A IIAvs ' )

Retired Deputy Chairman .

The May Departrnent Stores Company RICHARD A. IJDDY '

Chairman, President and Chief Executive Officer - General American Life insurance Company, a provider of insurance prmluas and services G(m)oN R. LonMAN '

President and Chief Executne Officer -

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_________._.__j

ULNRC-03990, 1998 Annual Rept for Ameren Corp/Union Electric Co. with

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ULNRC-03990, 1998 Annual Rept for Ameren Corp/Union Electric Co. with

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