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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the Quarterly Period Ended June 30, 2012

OR

 

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from             to             .

 

Commission

File Number

  

Exact name of registrant as specified in its charter;

State of Incorporation;

Address and Telephone Number

  

IRS Employer

Identification No.

1-14756    Ameren Corporation    43-1723446
   (Missouri Corporation)   
   1901 Chouteau Avenue   
   St. Louis, Missouri 63103   
   (314) 621-3222   
1-2967    Union Electric Company    43-0559760
   (Missouri Corporation)   
   1901 Chouteau Avenue   
   St. Louis, Missouri 63103   
   (314) 621-3222   
1-3672    Ameren Illinois Company    37-0211380
   (Illinois Corporation)   
   300 Liberty Street   
   Peoria, Illinois 61602   
   (309) 677-5271   
333-56594    Ameren Energy Generating Company    37-1395586
   (Illinois Corporation)   
   1500 Eastport Plaza Drive   
   Collinsville, Illinois 62234   
   (618) 343-7700   

Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

 

Ameren Corporation    Yes    x    No    ¨
Union Electric Company    Yes    x    No    ¨
Ameren Illinois Company    Yes    x    No    ¨
Ameren Energy Generating Company (a)    Yes    ¨    No    x

 

(a) Ameren Energy Generating Company is not required to file reports under the Securities Exchange Act of 1934. However, Ameren Energy Generating Company has filed all Exchange Act reports for the preceding 12 months.

Indicate by check mark whether each registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Ameren Corporation    Yes    x    No    ¨
Union Electric Company    Yes    x    No    ¨
Ameren Illinois Company    Yes    x    No    ¨
Ameren Energy Generating Company    Yes    x    No    ¨

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

     Large Accelerated
Filer
   Accelerated
Filer
   Non-Accelerated
Filer
   Smaller Reporting
Company

Ameren Corporation

   x    ¨    ¨    ¨

Union Electric Company

   ¨    ¨    x    ¨

Ameren Illinois Company

   ¨    ¨    x    ¨

Ameren Energy Generating Company

   ¨    ¨    x    ¨

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Ameren Corporation    Yes    ¨    No    x
Union Electric Company    Yes    ¨    No    x
Ameren Illinois Company    Yes    ¨    No    x
Ameren Energy Generating Company    Yes    ¨    No    x

The number of shares outstanding of each registrant’s classes of common stock as of July 31, 2012, was as follows:

 

Ameren Corporation   Common stock, $0.01 par value per share – 242,634,671
Union Electric Company   Common stock, $5 par value per share, held by Ameren Corporation (parent company of the registrant) - 102,123,834
Ameren Illinois Company  

Common stock, no par value, held by Ameren

Corporation (parent company of the registrant) - 25,452,373

Ameren Energy Generating Company  

Common stock, no par value, held by Ameren Energy

Resources Company, LLC (parent company of the

registrant and subsidiary of Ameren

Corporation) - 2,000

OMISSION OF CERTAIN INFORMATION

Ameren Energy Generating Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format allowed under that General Instruction.

 

 

This combined Form 10-Q is separately filed by Ameren Corporation, Union Electric Company, Ameren Illinois Company and Ameren Energy Generating Company. Each registrant hereto is filing on its own behalf all of the information contained in this quarterly report that relates to such registrant. Each registrant hereto is not filing any information that does not relate to such registrant, and therefore makes no representation as to any such information.

 


Table of Contents

TABLE OF CONTENTS

 

          Page  

Glossary of Terms and Abbreviations

     3   

Forward-looking Statements

     3   

PART I     Financial Information

  

Item 1.

  

Financial Statements (Unaudited)

  
   Ameren Corporation   
  

Consolidated Statement of Income (Loss)

     5   
  

Consolidated Statement of Comprehensive Income (Loss)

     6   
  

Consolidated Balance Sheet

     7   
  

Consolidated Statement of Cash Flows

     8   
   Union Electric Company   
  

Statement of Income and Comprehensive Income

     9   
  

Balance Sheet

     10   
  

Statement of Cash Flows

     11   
   Ameren Illinois Company   
  

Statement of Income and Comprehensive Income

     12   
  

Balance Sheet

     13   
  

Statement of Cash Flows

     14   
   Ameren Energy Generating Company   
  

Consolidated Statement of Income (Loss) and Comprehensive Income (Loss)

     15   
  

Consolidated Balance Sheet

     16   
  

Consolidated Statement of Cash Flows

     17   
  

Combined Notes to Financial Statements

     18   

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     59   

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

     88   

Item 4.

  

Controls and Procedures

     92   

PART II   Other Information

  

Item 1.

  

Legal Proceedings

     92   

Item 1A.

  

Risk Factors

     93   

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

     93   

Item 6.

  

Exhibits

     94   

Signatures

     96   

This Form 10-Q contains “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements should be read with the cautionary statements and important factors included on page 4 of this Form 10-Q under the heading “Forward-looking Statements.” Forward-looking statements are all statements other than statements of historical fact, including those statements that are identified by the use of the words “anticipates,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” and similar expressions.

 

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GLOSSARY OF TERMS AND ABBREVIATIONS

We use the words “our,” “we” or “us” with respect to certain information that relates to the individual registrants within the Ameren Corporation consolidated group. When appropriate, subsidiaries of Ameren Corporation are named specifically as their various business activities are discussed. Refer to the Form 10-K for a complete listing of glossary terms and abbreviations. Only new or significantly changed terms and abbreviations are included below.

Ameren Illinois or AIC - Ameren Illinois Company, an Ameren Corporation subsidiary that operates a rate-regulated electric and natural gas transmission and distribution business in Illinois, doing business as Ameren Illinois. Ameren Illinois is also defined as a financial reporting segment consisting of Ameren Illinois’ rate-regulated businesses.

COL - Nuclear energy center combined construction and operating license.

Entergy - Entergy Arkansas, Inc.

Form 10-K - The combined Annual Report on Form 10-K for the year ended December 31, 2011, filed by the Ameren Companies with the SEC.

Megawatthour or MWh - One thousand kilowatthours.

Westinghouse - Westinghouse Electric Company.

 

 

FORWARD-LOOKING STATEMENTS

Statements in this report not based on historical facts are considered “forward-looking” and, accordingly, involve risks and uncertainties that could cause actual results to differ materially from those discussed. Although such forward-looking statements have been made in good faith and are based on reasonable assumptions, there is no assurance that the expected results will be achieved. These statements include (without limitation) statements as to future expectations, beliefs, plans, strategies, objectives, events, conditions, and financial performance. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are providing this cautionary statement to identify important factors that could cause actual results to differ materially from those anticipated. The following factors, in addition to those discussed under Risk Factors in the Form 10-K and elsewhere in this report and in our other filings with the SEC, could cause actual results to differ materially from management expectations suggested in such forward-looking statements:

 

 

regulatory, judicial, or legislative actions, including changes in regulatory policies and ratemaking determinations, such as the outcome of Ameren Missouri’s and Ameren Illinois’ electric rate cases filed in 2012; Ameren Missouri’s FAC prudence review and the related request for an accounting authority order; Ameren Illinois’ expected request for rehearing of a July 2012 FERC order requiring a refund to transmission services customers; and future regulatory, judicial, or legislative actions that seek to change regulatory recovery mechanisms, such as the IEIMA, which provides for formula ratemaking in Illinois;

 

 

the effect of Ameren Illinois participating in a new performance-based formula ratemaking process under the IEIMA, the related financial commitments required by the IEIMA and the resulting uncertain impact on the financial condition, results of operations and liquidity of Ameren Illinois;

 

 

the effects of, or changes to, the Illinois power procurement process;

 

 

changes in laws and other governmental actions, including monetary, fiscal, and tax policies;

 

 

changes in laws or regulations that adversely affect the ability of electric distribution companies and other purchasers of wholesale electricity to pay their suppliers, including Ameren Missouri and Marketing Company;

 

 

the effects of increased competition in the future due to, among other things, deregulation of certain aspects of our business at both the state and federal levels, and the implementation of deregulation;

 

 

the effects on demand for our services resulting from technological advances, including advances in energy efficiency and distributed generation sources, which generate electricity at the site of consumption;

 

 

increasing capital expenditure and operating expense requirements and our ability to recover these costs;

 

 

the cost and availability of fuel such as coal, natural gas, and enriched uranium used to produce electricity; the cost and availability of purchased power and natural gas for distribution; and the level and volatility of future market prices for such commodities, including the ability to recover the costs for such commodities;

 

 

the effectiveness of our risk management strategies and the use of financial and derivative instruments;

 

 

the level and volatility of future prices for power in the Midwest;

 

 

the development of a capacity market within MISO and the outcomes of MISO’s inaugural capacity auction in 2013;

 

 

business and economic conditions, including their impact on interest rates, bad debt expense, and demand for our products;

 

 

disruptions of the capital markets, deterioration in credit metrics of the Ameren Companies, or other events that make the Ameren Companies’ access to necessary capital, including short-term credit and liquidity, impossible, more difficult, or more costly;

 

 

our assessment of our liquidity;

 

 

the impact of the adoption of new accounting guidance and the application of appropriate technical accounting rules and guidance;

 

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actions of credit rating agencies and the effects of such actions;

 

 

the impact of weather conditions and other natural phenomena on us and our customers;

 

 

the impact of system outages;

 

 

generation, transmission, and distribution asset construction, installation, performance, and cost recovery;

 

 

the effects of our increasing investment in electric transmission projects and uncertainty as to whether we will achieve our expected returns in a timely fashion, if at all;

 

 

the extent to which Ameren Missouri prevails in its claims against insurers in connection with its Taum Sauk pumped-storage hydroelectric energy center incident;

 

 

the extent to which Ameren Missouri is permitted by its regulators to recover in rates the investments it made in connection with a proposed second unit at its Callaway energy center;

 

 

impairments of long-lived assets, intangible assets, or goodwill;

 

 

operation of Ameren Missouri’s Callaway energy center, including planned and unplanned outages, decommissioning, costs and potential increased costs because of NRC orders to address nuclear plant readiness as a result of nuclear-related developments in Japan in 2011;

 

 

the effects of strategic initiatives, including mergers, acquisitions and divestitures, and any related tax implications;

 

 

the impact of current environmental regulations on utilities and power generating companies and new, more stringent or changing requirements, including those related to greenhouse gases, other emissions, cooling water intake structures, CCR, and energy efficiency, that are enacted over time and that could limit or terminate the operation of certain of our generating units, increase our costs, result in an impairment of our assets, reduce our customers’ demand for electricity or natural gas, or otherwise have a negative financial effect;

 

 

the impact of complying with renewable energy portfolio requirements in Missouri;

 

 

labor disputes, workforce reductions, future wage and employee benefits costs, including changes in discount rates and returns on benefit plan assets;

 

 

the inability of our counterparties and affiliates to meet their obligations with respect to contracts, credit facilities, and financial instruments;

 

 

the cost and availability of transmission capacity for the energy generated by the Ameren Companies’ energy centers or required to satisfy energy sales made by the Ameren Companies;

 

 

legal and administrative proceedings; and

 

 

acts of sabotage, war, terrorism, cybersecurity attacks or intentionally disruptive acts.

Given these uncertainties, undue reliance should not be placed on these forward-looking statements. Except to the extent required by the federal securities laws, we undertake no obligation to update or revise publicly any forward-looking statements to reflect new information or future events.

 

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PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

AMEREN CORPORATION

CONSOLIDATED STATEMENT OF INCOME (LOSS)

(Unaudited) (In millions, except per share amounts)

 

           Three Months Ended      
June 30,
         Six Months Ended      
June  30,
 
     2012      2011      2012      2011  

Operating Revenues:

           

Electric

   $ 1,513        $ 1,614       $ 2,823        $ 3,084   

Gas

     147          167         495          601   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenues

     1,660          1,781         3,318          3,685   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Expenses:

           

Fuel

     346          371         673          750   

Purchased power

     133          237         296          464   

Gas purchased for resale

     49          79         264          367   

Other operations and maintenance

     458          473         885          936   

Asset impairments

             2         628          2   

Depreciation and amortization

     195          194         394          389   

Taxes other than income taxes

     116          109         237          234   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     1,297          1,465         3,377          3,142   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income (Loss)

     363          316         (59)         543   

Other Income and Expenses:

           

Miscellaneous income

     20          17         37          33   

Miscellaneous expense

             5         22          10   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other income

     13          12         15          23   

Interest Charges

     112          104         225          223   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (Loss) Before Income Taxes

     264          224         (269)         343   

Income Taxes (Benefit)

     54          85         (76)         130   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income (Loss)

     210          139         (193)         213   

Less: Net Income (Loss) Attributable to Noncontrolling Interests

     (1)         1         (1)         4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income (Loss) Attributable to Ameren Corporation

   $ 211        $ 138       $ (192)       $ 209   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings (Loss) per Common Share – Basic and Diluted

   $ 0.87        $ 0.57       $ (0.79)       $ 0.87   
  

 

 

    

 

 

    

 

 

    

 

 

 

Dividends per Common Share

   $ 0.40        $ 0.385       $ 0.80        $ 0.77   

Average Common Shares Outstanding

     246.6          241.2         242.6          240.9   

The accompanying notes are an integral part of these consolidated financial statements.

 

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AMEREN CORPORATION

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Unaudited) (In millions)

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  

Net Income (Loss)

   $ 210        $ 139        $ (193)       $ 213    

Other Comprehensive Income (Loss), Net of Taxes:

           

Unrealized net gain (loss) on derivative hedging instruments, net of income taxes (benefit) of $2, $(5), $9, and $(4), respectively

             (8)         14          (6)   

Reclassification adjustments for derivative (gains) losses included in net income, net of income taxes (benefit) of $(1), $(4), $(2), and $(2), respectively

                               

Pension and other postretirement benefit plan activity, net of income taxes (benefit) of $1, $(1), $1, and $(2), respectively

                             (1)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other comprehensive income (loss), net of taxes

             (1)         20          (4)   

Comprehensive Income (Loss)

     215          138          (173)         209    

Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interests

     (1)                 (1)           
  

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive Income (Loss) Attributable to Ameren Corporation

   $ 216        $ 137        $ (172)       $ 205    
  

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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AMEREN CORPORATION

CONSOLIDATED BALANCE SHEET

(Unaudited) (In millions, except per share amounts)

 

         June 30,    
2012
     December 31,
2011
 
ASSETS      

Current Assets:

     

Cash and cash equivalents

   $ 117        $ 255    

Accounts receivable – trade (less allowance for doubtful accounts of $24 and $20, respectively)

     417          473    

Unbilled revenue

     374          324    

Miscellaneous accounts and notes receivable

     69          69    

Materials and supplies

     686          712    

Mark-to-market derivative assets

     156          115    

Current regulatory assets

     236          215    

Other current assets

     99          132    
  

 

 

    

 

 

 

Total current assets

     2,154          2,295    
  

 

 

    

 

 

 

Property and Plant, Net

     17,690          18,127    

Investments and Other Assets:

     

Nuclear decommissioning trust fund

     386          357    

Goodwill

     411          411    

Intangible assets

     12            

Regulatory assets

     1,551          1,603    

Other assets

     776          845    
  

 

 

    

 

 

 

Total investments and other assets

     3,136          3,223    
  

 

 

    

 

 

 

TOTAL ASSETS

   $ 22,980        $ 23,645    
  

 

 

    

 

 

 
LIABILITIES AND EQUITY      

Current Liabilities:

     

Current maturities of long-term debt

   $ 179        $ 179    

Short-term debt

     30          148    

Accounts and wages payable

     479          693    

Taxes accrued

     141          65    

Interest accrued

     113          101    

Customer deposits

     97          98    

Mark-to-market derivative liabilities

     198          161    

Current regulatory liabilities

     145          133    

Other current liabilities

     221          207    
  

 

 

    

 

 

 

Total current liabilities

     1,603          1,785    
  

 

 

    

 

 

 

Long-term Debt, Net

     6,678          6,677    

Deferred Credits and Other Liabilities:

     

Accumulated deferred income taxes, net

     3,199          3,315    

Accumulated deferred investment tax credits

     75          79    

Regulatory liabilities

     1,470          1,502    

Asset retirement obligations

     440          428    

Pension and other postretirement benefits

     1,251          1,344    

Other deferred credits and liabilities

     564          447    
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     6,999          7,115    
  

 

 

    

 

 

 

Commitments and Contingencies (Notes 2, 8, 9 and 10)

     

Ameren Corporation Stockholders’ Equity:

     

Common stock, $.01 par value, 400.0 shares authorized – shares outstanding of 242.6 and 242.6, respectively

               

Other paid-in capital, principally premium on common stock

     5,600          5,598    

Retained earnings

     1,983          2,369    

Accumulated other comprehensive loss

     (30)         (50)   
  

 

 

    

 

 

 

Total Ameren Corporation stockholders’ equity

     7,555          7,919    

Noncontrolling Interests

     145          149    
  

 

 

    

 

 

 

Total equity

     7,700          8,068    
  

 

 

    

 

 

 

TOTAL LIABILITIES AND EQUITY

   $ 22,980        $ 23,645    
  

 

 

    

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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AMEREN CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited) (In millions)

 

         Six Months Ended    
June 30,
 
     2012      2011  

Cash Flows From Operating Activities:

     

Net income (loss)

   $ (193)       $ 213    

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

     

Loss on asset impairments

     628            

Net gain on sales of properties

     (9)         (11)   

Net mark-to-market (gain) loss on derivatives

     11          (5)   

Depreciation and amortization

     373          373    

Amortization of nuclear fuel

     41          34    

Amortization of debt issuance costs and premium/discounts

     11          12    

Deferred income taxes and investment tax credits, net

     (100)         143    

Allowance for equity funds used during construction

     (17)         (15)   

Other

               

Changes in assets and liabilities:

     

Receivables

     (9)         23    

Materials and supplies

     27          55    

Accounts and wages payable

     (146)         (134)   

Taxes accrued

     75          76    

Assets, other

     11          82    

Liabilities, other

     72          (3)   

Pension and other postretirement benefits

     24          31    

Counterparty collateral, net

     (2)         23    
  

 

 

    

 

 

 

Net cash provided by operating activities

     805          899    
  

 

 

    

 

 

 

Cash Flows From Investing Activities:

     

Capital expenditures

     (565)         (507)   

Nuclear fuel expenditures

     (52)         (33)   

Purchases of securities – nuclear decommissioning trust fund

     (206)         (125)   

Sales of securities – nuclear decommissioning trust fund

     169          113    

Proceeds from sales of properties

     18          49    

Other

     (2)           
  

 

 

    

 

 

 

Net cash used in investing activities

     (638)         (494)   
  

 

 

    

 

 

 

Cash Flows From Financing Activities:

     

Dividends on common stock

     (187)         (186)   

Dividends paid to noncontrolling interest holders

     (3)         (3)   

Short-term debt and credit facility repayments, net

     (118)         (192)   

Maturities of long-term debt

             (150)   

Generator advances received for construction

               

Repayments of generator advances received for construction

             (73)   

Issuances of common stock

             32    
  

 

 

    

 

 

 

Net cash used in financing activities

     (305)         (572)   
  

 

 

    

 

 

 

Net change in cash and cash equivalents

     (138)         (167)   

Cash and cash equivalents at beginning of year

     255          545    
  

 

 

    

 

 

 

Cash and cash equivalents at end of period

   $ 117        $ 378    
  

 

 

    

 

 

 

Noncash financing activity – dividends on common stock

   $ (7)       $   

Noncash investing activity – DOE settlement

               

The accompanying notes are an integral part of these consolidated financial statements.

 

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UNION ELECTRIC COMPANY

STATEMENT OF INCOME AND COMPREHENSIVE INCOME

(Unaudited) (In millions)

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  

Operating Revenues:

           

Electric

   $ 822       $ 791       $ 1,458       $ 1,493   

Gas

     21         28         76         97   

Other

     1         3         1         4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenues

     844         822         1,535         1,594   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Expenses:

           

Fuel

     177         204         357         433   

Purchased power

     -         26         20         46   

Gas purchased for resale

     5         11         37         51   

Other operations and maintenance

     206         231         408         464   

Depreciation and amortization

     109         98         217         198   

Taxes other than income taxes

     78         76         149         149   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     575         646         1,188         1,341   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income

     269         176         347         253   

Other Income and Expenses:

           

Miscellaneous income

     18         16         33         29   

Miscellaneous expense

     4         3         7         6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other income

     14         13         26         23   

Interest Charges

     56         45         112         99   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income Before Income Taxes

     227         144         261         177   

Income Taxes

     83         53         95         64   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income

     144         91         166         113   

Other Comprehensive Income

     -         -         -         -   
  

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive Income

   $ 144       $ 91       $ 166       $ 113   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

Net Income

   $ 144       $ 91       $ 166       $ 113   

Preferred Stock Dividends

     1         1         2         2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income Available to Common Stockholder

   $ 143       $ 90       $ 164       $ 111   
  

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes as they relate to Union Electric Company are an integral part of these financial statements.

 

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UNION ELECTRIC COMPANY

BALANCE SHEET

(Unaudited) (In millions, except per share amounts)

 

         June 30,    
2012
     December 31,
2011
 
ASSETS      

Current Assets:

     

Cash and cash equivalents

   $ -       $ 201   

Accounts receivable – trade (less allowance for doubtful accounts of $7 and $7, respectively)

     180         212   

Unbilled revenue

     224         139   

Miscellaneous accounts and notes receivable

     46         43   

Materials and supplies

     388         348   

Current regulatory assets

     119         109   

Other current assets

     66         82   
  

 

 

    

 

 

 

Total current assets

     1,023         1,134   
  

 

 

    

 

 

 

Property and Plant, Net

     10,038         9,958   

Investments and Other Assets:

     

Nuclear decommissioning trust fund

     386         357   

Intangible assets

     11         7   

Regulatory assets

     775         855   

Other assets

     447         446   
  

 

 

    

 

 

 

Total investments and other assets

     1,619         1,665   
  

 

 

    

 

 

 

TOTAL ASSETS

   $ 12,680       $ 12,757   
  

 

 

    

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY      

Current Liabilities:

     

Current maturities of long-term debt

   $ 178       $ 178   

Borrowings from money pool

     67         -   

Accounts and wages payable

     168         414   

Accounts payable – affiliates

     62         73   

Taxes accrued

     103         74   

Interest accrued

     76         62   

Current regulatory liabilities

     46         57   

Other current liabilities

     130         84   
  

 

 

    

 

 

 

Total current liabilities

     830         942   
  

 

 

    

 

 

 

Long-term Debt, Net

     3,772         3,772   

Deferred Credits and Other Liabilities:

     

Accumulated deferred income taxes, net

     2,199         2,132   

Accumulated deferred investment tax credits

     67         70   

Regulatory liabilities

     879         836   

Asset retirement obligations

     337         328   

Pension and other postretirement benefits

     442         491   

Other deferred credits and liabilities

     153         149   
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     4,077         4,006   
  

 

 

    

 

 

 

Commitments and Contingencies (Notes 2, 8, 9 and 10)

     

Stockholders’ Equity:

     

Common stock, $5 par value, 150.0 shares authorized – 102.1 shares outstanding

     511         511   

Other paid-in capital, principally premium on common stock

     1,555         1,555   

Preferred stock not subject to mandatory redemption

     80         80   

Retained earnings

     1,855         1,891   
  

 

 

    

 

 

 

Total stockholders’ equity

     4,001         4,037   
  

 

 

    

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 12,680       $ 12,757   
  

 

 

    

 

 

 

The accompanying notes as they relate to Union Electric Company are an integral part of these financial statements.

 

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UNION ELECTRIC COMPANY

STATEMENT OF CASH FLOWS

(Unaudited) (In millions)

 

     Six Months Ended
June 30,
 
     2012      2011  

Cash Flows From Operating Activities:

     

Net income

   $ 166        $ 113    

Adjustments to reconcile net income to net cash provided by operating activities:

     

Net mark-to-market loss on derivatives

               

Depreciation and amortization

     201          184    

Amortization of nuclear fuel

     41          34    

Amortization of debt issuance costs and premium/discounts

               

Deferred income taxes and investment tax credits, net

     76          86    

Allowance for equity funds used during construction

     (15)         (14)   

Other

             (5)   

Changes in assets and liabilities:

     

Receivables

     (65)         (82)   

Materials and supplies

     (43)         (2)   

Accounts and wages payable

     (164)         (137)   

Taxes accrued

     29          58    

Assets, other

     12          76    

Liabilities, other

     68          23    

Pension and other postretirement benefits

     18          15    
  

 

 

    

 

 

 

Net cash provided by operating activities

     327          353    
  

 

 

    

 

 

 

Cash Flows From Investing Activities:

     

Capital expenditures

     (299)         (272)   

Nuclear fuel expenditures

     (52)         (33)   

Purchases of securities – nuclear decommissioning trust fund

     (206)         (125)   

Sales of securities – nuclear decommissioning trust fund

     169          113    

Other

     (5)         (3)   
  

 

 

    

 

 

 

Net cash used in investing activities

     (393)         (320)   
  

 

 

    

 

 

 

Cash Flows From Financing Activities:

     

Dividends on common stock

     (200)         (135)   

Dividends on preferred stock

     (2)         (2)   

Money pool borrowings, net

     67            

Repayments of generator advances received for construction

             (19)   
  

 

 

    

 

 

 

Net cash used in financing activities

     (135)         (156)   
  

 

 

    

 

 

 

Net change in cash and cash equivalents

     (201)         (123)   

Cash and cash equivalents at beginning of year

     201          202    
  

 

 

    

 

 

 

Cash and cash equivalents at end of period

   $       $ 79    
  

 

 

    

 

 

 

Noncash investing activity – DOE Settlement

   $       $   

The accompanying notes as they relate to Union Electric Company are an integral part of these financial statements.

 

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Table of Contents

AMEREN ILLINOIS COMPANY

STATEMENT OF INCOME AND COMPREHENSIVE INCOME

(Unaudited) (In millions)

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  

Operating Revenues:

           

Electric

   $ 437        $ 483        $ 868        $ 925    

Gas

     127          139          420          505    

Other

                               
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenues

     564          623          1,288          1,431    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Expenses:

           

Purchased power

     162          196          352          407    

Gas purchased for resale

     44          67          227          315    

Other operations and maintenance

     186          181          354          349    

Depreciation and amortization

     55          54          110          106    

Taxes other than income taxes

     31          26          70          67    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     478          524          1,113          1,244    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income

     86          99          175          187    

Other Income and Expenses:

           

Miscellaneous income

                               

Miscellaneous expense

                     13            
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other income (expense)

                     (10)           
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest Charges

     31          35          64          70    
  

 

 

    

 

 

    

 

 

    

 

 

 

Income Before Income Taxes

     55          64          101          118    

Income Taxes

     22          26          40          46    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income

     33          38          61          72    

Other Comprehensive Loss, Net of Taxes:

           

Pension and other postretirement benefit plan activity, net of income taxes (benefit) of $(1), $(1), $(1) and $(1), respectively

     (1)         (1)         (2)         (2)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive Income

   $ 32        $ 37        $ 59        $ 70    
  

 

 

    

 

 

    

 

 

    

 

 

 
   

Net Income

   $ 33        $ 38        $ 61        $ 72    

Preferred Stock Dividends

                               
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income Available to Common Stockholder

   $ 32        $ 37        $ 59        $ 70    
  

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes as they relate to Ameren Illinois Company are an integral part of these financial statements.

 

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AMEREN ILLINOIS COMPANY

BALANCE SHEET

(Unaudited) (In millions)

 

                                             
     June 30,
2012
     December 31,
2011
 
ASSETS      

Current Assets:

     

Cash and cash equivalents

   $ 60       $ 21   

Advances to money pool

     67         -   

Accounts receivable – trade (less allowance for doubtful accounts of $16 and $13, respectively)

     175         201   

Accounts receivable – affiliates

     10         15   

Unbilled revenue

     118         146   

Miscellaneous accounts receivable

     9         6   

Materials and supplies

     137         199   

Counterparty collateral asset

     45         50   

Current regulatory assets

     231         306   

Current accumulated deferred income taxes, net

     44         58   

Other current assets

     10         15   
  

 

 

    

 

 

 

Total current assets

     906         1,017   
  

 

 

    

 

 

 

Property and Plant, Net

     4,869         4,770   

Investments and Other Assets:

     

Tax receivable – Genco

     49         56   

Goodwill

     411         411   

Regulatory assets

     775         748   

Other assets

     117         211   
  

 

 

    

 

 

 

Total investments and other assets

     1,352         1,426   
  

 

 

    

 

 

 

TOTAL ASSETS

   $ 7,127       $ 7,213   
  

 

 

    

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY      

Current Liabilities:

     

Current maturities of long-term debt

   $ 1       $ 1   

Accounts and wages payable

     171         133   

Accounts payable – affiliates

     76         103   

Taxes accrued

     14         15   

Customer deposits

     75         76   

Mark-to-market derivative liabilities

     97         99   

Mark-to-market derivative liabilities – affiliates

     114         200   

Environmental remediation

     32         63   

Current regulatory liabilities

     98         76   

Other current liabilities

     86         92   
  

 

 

    

 

 

 

Total current liabilities

     764         858   
  

 

 

    

 

 

 

Long-term Debt, Net

     1,657         1,657   

Deferred Credits and Other Liabilities:

     

Accumulated deferred income taxes, net

     941         895   

Accumulated deferred investment tax credits

     6         7   

Regulatory liabilities

     591         666   

Pension and other postretirement benefits

     458         495   

Other deferred credits and liabilities

     276         183   
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     2,272         2,246   
  

 

 

    

 

 

 

Commitments and Contingencies (Notes 2, 8 and 9)

     

Stockholders’ Equity:

     

Common stock, no par value, 45.0 shares authorized – 25.5 shares outstanding

     -         -   

Other paid-in capital

     1,965         1,965   

Preferred stock not subject to mandatory redemption

     62         62   

Retained earnings

     392         408   

Accumulated other comprehensive income

     15         17   
  

 

 

    

 

 

 

Total stockholders’ equity

     2,434         2,452   
  

 

 

    

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 7,127       $ 7,213   
  

 

 

    

 

 

 

The accompanying notes as they relate to Ameren Illinois Company are an integral part of these financial statements.

 

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Table of Contents

AMEREN ILLINOIS COMPANY

STATEMENT OF CASH FLOWS

(Unaudited) (In millions)

 

     Six Months Ended
June 30,
 
     2012      2011  

Cash Flows From Operating Activities:

     

Net income

   $ 61        $ 72    

Adjustments to reconcile net income to net cash provided by operating activities:

     

Depreciation and amortization

     105          102    

Amortization of debt issuance costs and premium/discounts

               

Deferred income taxes and investment tax credits, net

     63          21    

Other

     (5)         (4)   

Changes in assets and liabilities:

     

Receivables

     62          110    

Materials and supplies

     59          53    

Accounts and wages payable

     13          (3)   

Taxes accrued

     (1)         21    

Assets, other

     (3)         15    

Liabilities, other

             (26)   

Pension and other postretirement benefits

     (5)         14    

Counterparty collateral, net

             22    
  

 

 

    

 

 

 

Net cash provided by operating activities

     360          401    
  

 

 

    

 

 

 

Cash Flows From Investing Activities:

     

Capital expenditures

     (184)         (174)   

Returns of advances from ATXI for construction

             49    

Money pool advances, net

     (67)           

Other

               
  

 

 

    

 

 

 

Net cash used in investing activities

     (247)         (121)   
  

 

 

    

 

 

 

Cash Flows From Financing Activities:

     

Dividends on common stock

     (75)         (150)   

Dividends on preferred stock

     (2)         (2)   

Maturities of long-term debt

             (150)   

Generator advances received for construction

               

Repayments of generator advances received for construction

             (53)   

Capital contribution from parent

               
  

 

 

    

 

 

 

Net cash used in financing activities

     (74)         (349)   
  

 

 

    

 

 

 

Net change in cash and cash equivalents

     39          (69)   

Cash and cash equivalents at beginning of year

     21          322    
  

 

 

    

 

 

 

Cash and cash equivalents at end of period

   $ 60        $ 253    
  

 

 

    

 

 

 

The accompanying notes as they relate to Ameren Illinois Company are an integral part of these financial statements.

 

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Table of Contents

AMEREN ENERGY GENERATING COMPANY

CONSOLIDATED STATEMENT OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

(Unaudited) (In millions)

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  

Operating Revenues

   $ 194        $ 260        $ 388        $ 501    

Operating Expenses:

           

Fuel

     125          130          230          241    

Purchased power

             18                  18    

Other operations and maintenance

     45          45          92          90    

Depreciation and amortization

     23          25          46          49    

Taxes other than income taxes

                     11          12    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     198          223          379          410    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income (Loss)

     (4)         37                  91    

Interest Charges

     12          14          26          31    
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (Loss) Before Income Taxes

     (16)         23          (17)         60    

Income Taxes (Benefit)

     (10)         10          (8)         25    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income (Loss)

     (6)         13          (9)         35    

Less: Net Income (Loss) Attributable to Noncontrolling Interest

     (2)                 (4)           
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income (Loss) Attributable to Ameren Energy Generating Company

   $ (4)       $ 13        $ (5)       $ 34    
  

 

 

    

 

 

    

 

 

    

 

 

 
                                     

Net Income (Loss)

   $ (6)       $ 13        $ (9)       $ 35    

Other Comprehensive Income, Net of Taxes:

           

Pension and other postretirement benefit plan activity, net of income taxes of $3, $1, $3 and $1, respectively

                               
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other comprehensive income, net of taxes

                               

Comprehensive Income (Loss)

     (2)         13          (4)         36    

Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interest

     (2)                 (4)           
  

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive Income Attributable to Ameren Energy Generating Company

   $       $ 13        $       $ 35    
  

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes as they relate to Ameren Energy Generating Company are an integral part of these consolidated financial statements.

 

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Table of Contents

AMEREN ENERGY GENERATING COMPANY

CONSOLIDATED BALANCE SHEET

(Unaudited) (In millions, except shares)

 

                                             
     June 30,
2012
     December 31,
2011
 
ASSETS      

Current Assets:

     

Cash and cash equivalents

   $ 26        $   

Advances to money pool

     38          74    

Accounts receivable – affiliates

     73          89    

Miscellaneous accounts receivable

     10          13    

Materials and supplies

     121          122    

Other current assets

     19          19    
  

 

 

    

 

 

 

Total current assets

     287          325    
  

 

 

    

 

 

 

Property and Plant, Net

     2,274          2,231    

Other assets

     14          16    
  

 

 

    

 

 

 

TOTAL ASSETS

   $ 2,575        $ 2,572    
  

 

 

    

 

 

 
LIABILITIES AND EQUITY      

Current Liabilities:

     

Accounts and wages payable

   $ 82        $ 71    

Accounts payable – affiliates

     11          13    

Current portion of tax payable – Ameren Illinois

               

Taxes accrued

     20          20    

Interest accrued

     13          13    

Other current liabilities

     22          17    
  

 

 

    

 

 

 

Total current liabilities

     157          142    
  

 

 

    

 

 

 

Long-term Debt, Net

     824          824    

Deferred Credits and Other Liabilities:

     

Accumulated deferred income taxes, net

     296          304    

Accumulated deferred investment tax credits

               

Tax payable – Ameren Illinois

     49          56    

Asset retirement obligations

     68          66    

Pension and other postretirement benefits

     136          141    

Other deferred credits and liabilities

     21          12    
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     572          581    
  

 

 

    

 

 

 

Commitments and Contingencies (Notes 8 and 9)

     

Ameren Energy Generating Company Stockholder’s Equity:

     

Common stock, no par value, 10,000 shares authorized – 2,000 shares outstanding

               

Other paid-in capital

     654          653    

Retained earnings

     432          437    

Accumulated other comprehensive loss

     (67)         (72)   
  

 

 

    

 

 

 

Total Ameren Energy Generating Company stockholder’s equity

     1,019          1,018    

Noncontrolling Interest

               
  

 

 

    

 

 

 

Total equity

     1,022          1,025    
  

 

 

    

 

 

 

TOTAL LIABILITIES AND EQUITY

   $ 2,575        $ 2,572    
  

 

 

    

 

 

 

The accompanying notes as they relate to Ameren Energy Generating Company are an integral part of these consolidated financial statements.

 

16


Table of Contents

AMEREN ENERGY GENERATING COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited) (In millions)

 

     Six Months Ended
June 30,
 
     2012      2011  

Cash Flows From Operating Activities:

     

Net income (loss)

   $ (9)       $ 35    

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

     

(Gain) loss on sales of properties

             (11)   

Net mark-to-market (gain) loss on derivatives

     14          (6)   

Depreciation and amortization

     46          51    

Amortization of debt issuance costs and premium/discounts

               

Deferred income taxes and investment tax credits, net

     (10)         26    

Other

               

Changes in assets and liabilities:

     

Receivables

     17          (15)   

Materials and supplies

               

Accounts and wages payable

     (8)         13    

Taxes accrued

               

Assets, other

     (2)         (2)   

Liabilities, other

     (5)         (12)   

Pension and other postretirement benefits

             (3)   
  

 

 

    

 

 

 

Net cash provided by operating activities

     60          88    
  

 

 

    

 

 

 

Cash Flows From Investing Activities:

     

Capital expenditures

     (79)         (84)   

Proceeds from sales of properties

             48    

Money pool advances, net

     36          25    
  

 

 

    

 

 

 

Net cash used in investing activities

     (42)         (11)   
  

 

 

    

 

 

 

Cash Flows From Financing Activities:

     

Credit facility repayments, net

             (100)   

Capital contribution from parent

             24    
  

 

 

    

 

 

 

Net cash used in financing activities

             (76)   
  

 

 

    

 

 

 

Net change in cash and cash equivalents

     18            

Cash and cash equivalents at beginning of year

               
  

 

 

    

 

 

 

Cash and cash equivalents at end of period

   $ 26        $   
  

 

 

    

 

 

 

The accompanying notes as they relate to Ameren Energy Generating Company are an integral part of these consolidated financial statements.

 

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AMEREN CORPORATION (Consolidated)

UNION ELECTRIC COMPANY

AMEREN ILLINOIS COMPANY

AMEREN ENERGY GENERATING COMPANY (Consolidated)

COMBINED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

June 30, 2012

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Ameren, headquartered in St. Louis, Missouri, is a public utility holding company under PUHCA 2005, administered by FERC. Ameren’s primary assets are the common stock of its subsidiaries. Ameren’s subsidiaries are separate, independent legal entities with separate businesses, assets, and liabilities. These subsidiaries operate, as the case may be, rate-regulated electric generation, transmission and distribution businesses, rate-regulated natural gas transmission and distribution businesses, and merchant electric generation businesses in Missouri and Illinois. Dividends on Ameren’s common stock and the payment of expenses by Ameren depend on distributions made to it by its subsidiaries. Ameren’s principal subsidiaries are listed below. Also see the Glossary of Terms and Abbreviations at the front of this report and in the Form 10-K.

 

   

Union Electric Company, or Ameren Missouri, operates a rate-regulated electric generation, transmission and distribution business, and a rate-regulated natural gas transmission and distribution business in Missouri.

 

   

Ameren Illinois Company, or Ameren Illinois, operates a rate-regulated electric and natural gas transmission and distribution business in Illinois.

 

   

AER consists of non-rate-regulated operations, including Genco, AERG, and Marketing Company. Genco operates a merchant electric generation business in Illinois and holds an 80% ownership interest in EEI, which it consolidates for financial reporting purposes.

Ameren has various other subsidiaries responsible for activities such as the provision of shared services.

The financial statements of Ameren and Genco are prepared on a consolidated basis. Ameren Missouri and Ameren Illinois have no subsidiaries, and therefore their financial statements are not prepared on a consolidated basis. All significant intercompany transactions have been eliminated. All tabular dollar amounts are in millions, unless otherwise indicated.

Our accounting policies conform to GAAP. Our financial statements reflect all adjustments (which include normal, recurring adjustments) that are necessary, in our opinion, for a fair presentation of our results. The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. Such estimates and assumptions affect reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of financial statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. The results of operations of an interim period may not give a true indication of results that may be expected for a full year. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K.

Earnings Per Share

There were no material differences between Ameren’s basic and diluted earnings per share amounts for the three months and six months ended June 30, 2012, and 2011. The number of dilutive restricted stock shares and performance share units had an immaterial impact on earnings per share.

Stock-based Compensation

The fair value of each share unit awarded in January 2012 under the 2006 Plan was determined to be $35.68. That amount was based on Ameren’s closing common share price of $33.13 at December 31, 2011, and lattice simulations. Lattice simulations are used to estimate expected share payout based on Ameren’s total shareholder return for a three-year performance period relative to the designated peer group beginning January 1, 2012. The simulations can produce a greater fair value for the share unit than the applicable closing common share price because they include the weighted payout scenarios in which an increase in the share price has occurred. The significant assumptions used to calculate fair value also included a three-year risk-free rate of 0.41%, volatility of 17% to 31% for the peer group, and Ameren’s attainment of a three-year average earnings per share threshold during the performance period.

Accounting Changes

Disclosures about Fair Value Measurements

In May 2011, FASB issued additional authoritative guidance regarding fair value measurements. The guidance amended the disclosure requirements for fair value measurements in order to align the principles for fair value measurements and the related disclosure requirements under GAAP and International Financial Reporting Standards. The amendments did not affect the Ameren Companies’ results of operations, financial position, or liquidity, as this guidance only required additional disclosures. The Ameren Companies adopted this guidance in the first quarter of 2012. See Note 7 - Fair Value Measurements for the required additional disclosures.

 

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Presentation of Comprehensive Income

In June 2011, FASB amended its guidance on the presentation of comprehensive income in financial statements. The amended guidance changed the presentation of comprehensive income in the financial statements. It required entities to report components of comprehensive income either in a continuous statement of comprehensive income or in two separate but consecutive statements. This guidance was effective for the Ameren Companies beginning in the first quarter of 2012 with retroactive application required. The implementation of the amended guidance did not affect the Ameren Companies’ results of operations, financial position, or liquidity.

Goodwill and Intangible Assets

Goodwill. Goodwill represents the excess of the purchase price of an acquisition over the fair value of the net assets acquired. As of June 30, 2012, Ameren’s and Ameren Illinois’ goodwill related to Ameren’s acquisition of IP in 2004 and CILCORP in 2003. We evaluate goodwill for impairment as of October 31 of each year, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Intangible Assets. Ameren, Ameren Missouri and Genco classify emission allowances and renewable energy credits as intangible assets. We evaluate intangible assets for impairment if events or changes in circumstances indicate that their carrying amount might be impaired.

At June 30, 2012, Ameren’s and Ameren Missouri’s intangible assets consisted of renewable energy credits obtained through wind and solar power purchase agreements. The book value of each of Ameren’s and Ameren Missouri’s renewable energy credits was $12 million and $11 million, respectively, at June 30, 2012. The book value of each of Ameren’s, Ameren Missouri’s, and Genco’s CAIR emission allowances was immaterial at June 30, 2012.

Renewable energy credits and emission allowances are charged to purchased power expense and fuel expense, respectively, as they are used in operations. The amortization expense based on usage of renewable energy credits and emission allowances was less than $1 million for Ameren, Ameren Missouri, Ameren Illinois, and Genco for the three and six months ended June 30, 2012. The amortization expense based on usage of renewable energy credits and emission allowances was $1 million, less than $1 million, and less than $1 million for Ameren, Ameren Illinois, and Genco, respectively, for the three months ended June 30, 2011, and $3 million, $1 million, and $2 million for Ameren, Ameren Illinois, and Genco, respectively, for the six months ended June 30, 2011. Amortization expense based on Ameren Missouri’s usage of renewable energy credits was deferred as a regulatory asset pending recovery from customers through rates.

During the second quarter of 2011, Ameren and Genco recorded a noncash pretax impairment charge of $2 million and $1 million, respectively. Ameren Missouri recorded a $1 million impairment of its SO2 emission allowances by reducing a previously established regulatory liability relating to the SO2 emission allowances, which had no impact on earnings. The impairment was triggered by a significant observable decline in the market price of SO2 and NOx allowances used for CAIR compliance.

Excise Taxes

Excise taxes imposed on us are reflected on Ameren Missouri electric and Ameren Missouri and Ameren Illinois natural gas customer bills. They are recorded gross in “Operating Revenues - Electric,” “Operating Revenues - Gas” and “Operating Expenses - Taxes other than income taxes” on the statement of income or the statement of income and comprehensive income. Excise taxes reflected on Ameren Illinois electric customer bills are imposed on the consumer and are therefore not included in revenues and expenses. They are recorded as tax collections payable and included in “Taxes accrued” on the balance sheet. The following table presents excise taxes recorded in “Operating Revenues - Electric,” “Operating Revenues - Gas” and “Operating Expenses - Taxes other than income taxes” for the three and six months ended June 30, 2012, and 2011:

 

      Three Months      Six Months  
     2012      2011      2012      2011  

Ameren Missouri

   $ 38       $ 34       $ 65       $ 63   

Ameren Illinois

     10         10         28         32   

Ameren

   $ 48       $ 44       $ 93       $ 95   

Uncertain Tax Positions

The amount of unrecognized tax benefits as of June 30, 2012, was $158 million, $132 million, $11 million, and $11 million for Ameren, Ameren Missouri, Ameren Illinois and Genco, respectively. The amount of unrecognized tax benefits (detriments) as of June 30, 2012, that would impact the effective tax rate, if recognized, was $1 million, $1 million, $(1) million and $1 million for Ameren, Ameren Missouri, Ameren Illinois and Genco, respectively.

Ameren’s federal income tax returns for the years 2007 through 2010 are before the Appeals Office of the Internal Revenue Service.

State income tax returns are generally subject to examination for a period of three years after filing of the return. The Ameren Companies do not currently have

 

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material state income tax issues under examination, administrative appeals, or litigation. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states.

It is expected that a partial settlement may be reached with the Appeals Office of the Internal Revenue Service in the next twelve months for the years 2007 through 2009 that would result in a decrease in uncertain tax liabilities. In addition, it is reasonably possible that events will occur during the next twelve months that would cause the total amount of unrecognized tax benefits for the Ameren Companies to increase or decrease. However, the Ameren Companies do not believe such increases or decreases would be material to their results of operations, financial position or liquidity.

Asset Retirement Obligations

AROs at Ameren, Ameren Missouri, Ameren Illinois and Genco increased compared to December 31, 2011, to reflect the accretion of obligations to their fair values. Ameren and Genco also recorded an additional ARO in the amount of $1 million related to the retirement costs for a Genco coal combustion byproduct storage area during the six months ended June 30, 2012.

Noncontrolling Interest

Ameren’s noncontrolling interests comprised the 20% of EEI not owned by Ameren and the preferred stock not subject to mandatory redemption of Ameren’s subsidiaries. These noncontrolling interests were classified as a component of equity separate from Ameren’s equity in its consolidated balance sheet. Genco’s noncontrolling interest comprised the 20% of EEI not owned by Genco. This noncontrolling interest was classified as a component of equity separate from Genco’s equity in its consolidated balance sheet.

A reconciliation of the equity changes attributable to the noncontrolling interests at Ameren and Genco for the three and six months ended June 30, 2012, and 2011, is shown below:

 

      Three Months       Six Months    
      2012     2011     2012     2011  

Ameren:

        

Noncontrolling interests, beginning of period

   $ 147      $ 155      $ 149      $ 154   

Net income (loss) attributable to noncontrolling interests

     (1     1        (1     4   

Dividends paid to noncontrolling interest holders

     (1     (1     (3     (3

Noncontrolling interests, end of period

   $ 145      $ 155      $ 145      $ 155   

Genco:

        

Noncontrolling interest, beginning of period

   $ 5      $ 12      $ 7      $ 11   

Net income (loss) attributable to noncontrolling interest

     (2     -        (4     1   

Noncontrolling interest, end of period

   $ 3      $ 12      $ 3      $ 12   

Medina Valley Asset Sale in 2012

In February 2012, Ameren completed the sale of its Medina Valley energy center’s net property and plant for cash proceeds of $16 million and an additional $1 million payment at the two-year anniversary date of the sale if there are no violations of representations and warranties contained in the sale agreement. Ameren recognized a $10 million pretax gain during the first quarter of 2012 from this sale. Medina Valley was included in Ameren’s Merchant Generation segment results.

EEI Employee Separation

In June 2012, EEI announced that it was reducing its workforce by 44 employees, which includes both management and labor union represented employees, in response to lower demand and prices for electricity. Affected employees will be leaving their employment during the third quarter of 2012, and management employees will receive benefits consistent with EEI’s standard severance benefits. As a result, Ameren and Genco both recorded a $1 million pretax charge to earnings during the second quarter of 2012 related to the workforce reduction. The charge was recorded to “Other Operations and Maintenance” expense on Ameren’s and Genco’s consolidated statements of income, and the charge was included in the Merchant Generation segment results.

The announced employee reduction will result in a curtailment of EEI’s pension and postretirement benefit plans, which are separate from Ameren’s pension and postretirement benefit plans. EEI is evaluating whether a curtailment gain or loss will be recognized during the quarter ended September 30, 2012, when the specific employee identification has been completed.

NOTE 2 - RATE AND REGULATORY MATTERS

Below is a summary of significant regulatory proceedings and related lawsuits. See also Note 2 - Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K. We are unable to predict the ultimate outcome of these matters, the timing of the final decisions of the various agencies and courts, or the impact on our results of operations, financial position, or liquidity.

 

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Missouri

2009 Electric Rate Order

In November 2011, the Missouri Court of Appeals issued a ruling that upheld the MoPSC’s January 2009 electric rate order. In March 2012, the Circuit Court of Stoddard County, Missouri released to Ameren Missouri all of the funds held in its registry relating to the stay, which totaled $21 million, reducing previously recorded trade accounts receivable.

2010 Electric Rate Order

In May 2012, the Cole County Circuit Court issued a ruling that upheld the MoPSC’s May 2010 electric rate order. In May 2012, the Cole County Circuit Court released to Ameren Missouri all of the funds held in its registry relating to the stay, which totaled $16 million, reducing the previously recorded trade accounts receivable.

2011 Electric Rate Order

In July 2011, the MoPSC issued an order approving an increase for Ameren Missouri in annual revenues for electric service of $173 million. The MoPSC’s order disallowed the recovery of all costs of enhancements, or costs that would have been incurred absent the breach, related to the rebuilding of the Taum Sauk energy center in excess of amounts recovered from property insurance. In July 2012, the Missouri Court of Appeals, Western District, upheld the MoPSC’s July 2011 electric rate order. Ameren Missouri will not seek further appeal of the MoPSC’s order.

Pending Electric Rate Case

In February 2012, Ameren Missouri filed a request with the MoPSC to increase its annual revenue for electric service by $376 million based on a 10.75% return on equity. The annual increase request included $80 million for recovery of the costs associated with energy efficiency programs under the MEEIA, which are discussed below. As part of its filing, Ameren Missouri requested that the MoPSC approve the implementation of a storm cost tracking mechanism, as well as plant-in-service accounting treatment. The plant-in-service accounting proposal is designed to reduce the impact of regulatory lag on earnings and future cash flows related to assets placed in service between rate cases by both accruing a return on the assets and deferring depreciation expense from their in-service dates until those capitalized costs are included in rates.

In July 2012, the MoPSC staff responded to the Ameren Missouri request for an electric service rate increase. The MoPSC staff recommended an increase to Ameren Missouri’s annual revenues of approximately $210 million based on a return on equity of 9%. The MoPSC staff opposed Ameren Missouri’s request to implement a storm cost tracking mechanism and Ameren Missouri’s plant-in-service accounting proposal. Additionally, the MoPSC staff’s recommended increase reflects its position that a refund received in June 2012 from Entergy relating to a power purchase agreement that expired in 2009 be returned to customers through a reduction in base rates over a three-year period. See below under Federal for additional information about this refund and Ameren Missouri’s power purchase agreement with Entergy. Other parties also made recommendations through testimony filed in this case.

A decision by the MoPSC in this proceeding is expected in December 2012. Ameren Missouri cannot predict the level of any electric service rate change the MoPSC may approve or whether any rate increase that may eventually be approved will be sufficient for Ameren Missouri to recover its costs and earn a reasonable return on its investments when the increase goes into effect.

MEEIA Filing

In August 2012, the MoPSC issued an order that approved a stipulation and agreement between Ameren Missouri, MoPSC staff, and other parties. The order includes megawatthour savings targets for Ameren Missouri’s energy efficiency programs as well as associated cost recovery mechanisms and incentive awards. The order provides that, beginning in 2013, Ameren Missouri will invest approximately $147 million over three years for energy efficiency programs. The order allows for Ameren Missouri to collect, over the next three years, its program costs and 90% of its projected lost revenue from customers starting on the expected effective date for the pending electric service rate case, which is expected to be January 2, 2013. The remaining 10% of projected lost revenue is expected to be recovered as part of future rate proceedings.

Additionally, the order provides for an incentive award that would allow Ameren Missouri to earn revenues of approximately $19 million if 100% of its energy efficiency goals are achieved during the three-year period, with the potential to earn more if Ameren Missouri’s energy savings exceed those goals. Ameren Missouri must achieve at least 70% of its energy efficiency goals before it earns any incentive award. The recovery of the incentive award from customers, if the energy efficiency goals are achieved, would begin after the three-year energy efficiency plan is complete and upon the effectiveness of an electric service rate case or potentially with the future adoption of a rider mechanism.

 

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The MoPSC’s order in this proceeding will not affect Ameren Missouri rates until these rates are included in an electric service rate case. The impacts of the MoPSC’s decision in this MEEIA filing are expected to be included in rates set under its pending electric service rate case that was filed in February 2012. Ameren Missouri’s pending electric service rate case includes an annual revenue increase request of $80 million related to its planned portfolio of energy efficiency programs included in its MEEIA filing.

FAC Prudence Review

Missouri law requires the MoPSC to complete prudence reviews of Ameren Missouri’s FAC at least every 18 months. In April 2011, the MoPSC issued an order with respect to its review of Ameren Missouri’s FAC for the period from March 1, 2009, to September 30, 2009. In this order, the MoPSC ruled that Ameren Missouri should have included in the FAC calculation all revenues and costs associated with certain long-term partial requirements sales that were made by Ameren Missouri because of the loss of Noranda’s load caused by a severe ice storm in January 2009. As a result of the order, Ameren Missouri recorded a pretax charge to earnings of $18 million, including $1 million for interest, in 2011 for its obligation to refund to Ameren Missouri’s electric customers the earnings associated with these sales previously recognized by Ameren Missouri during the period from March 1, 2009, to September 30, 2009.

Ameren Missouri disagrees with the MoPSC order’s classification of these sales and believes that the terms of its FAC tariff did not provide for the inclusion of these sales in the FAC calculation. In May 2012, upon appeal by Ameren Missouri, the Cole County Circuit Court issued a ruling that reversed the MoPSC’s April 2011 order. In June 2012, the MoPSC filed an appeal of the Cole County Circuit Court’s ruling to the Missouri Court of Appeals, Western District. Ameren Missouri has not recorded additional revenues as a result of the Cole County Circuit Court’s May 2012 ruling, as the MoPSC’s appeal to the Missouri Court of Appeals is ongoing and is not expected to be concluded until 2013.

In February 2012, the MoPSC staff issued its FAC review report for the period from October 1, 2009, to May 31, 2011. In its report, the MoPSC staff asked the MoPSC to direct Ameren Missouri to refund to customers the pretax earnings associated with the same long-term partial requirements sales contracts subsequent to September 30, 2009. The MoPSC staff calculated these pretax earnings to be $26 million. We cannot predict whether the MoPSC will approve the MoPSC staff’s position. If Ameren Missouri were to determine that these sales were probable of refund to Ameren Missouri’s electric customers, a charge to earnings would be recorded for the refund in the period in which that determination was made. Ameren Missouri does not currently believe these amounts are probable of refund to customers.

Separately, in July 2011, Ameren Missouri filed a request with the MoPSC for an accounting authority order that would allow Ameren Missouri to defer, as a regulatory asset, fixed costs totaling $36 million that were not recovered from Noranda as a result of the loss of load caused by the severe 2009 ice storm for potential recovery in a future electric rate case. We cannot predict the ultimate outcome of these regulatory or judicial proceedings. If the courts ultimately rule in favor of Ameren Missouri’s position regarding the classification of the long-term partial requirements sales, Ameren Missouri would not seek to recover from customers the sum that would be covered by the accounting authority order if it is granted.

Illinois

IEIMA

On January 3, 2012, Ameren Illinois elected to participate in the performance-based formula ratemaking process established pursuant to the IEIMA by filing initial performance-based formula rates with the ICC. The initial filing, based on 2010 recoverable costs and expected net plant additions for 2011 and 2012, will result in new electric delivery service rates in October 2012. Based on the ICC’s 2010 electric rate order, Ameren Illinois is currently billing its electric customers based on an annual delivery service revenue requirement of $834 million. In its initial filing, Ameren Illinois calculated its annual electric delivery service revenue requirement to be $814 million, which would result in a decrease of $20 million in its annual electric delivery service revenues. The ICC staff submitted its calculation of the revenue requirement included in Ameren Illinois’ initial filing and recommended an annual electric delivery service revenue requirement of $785 million, which would result in a decrease of $49 million in Ameren Illinois’ annual electric delivery service revenues. Other parties also made recommendations through testimony filed in Ameren Illinois’ initial filing. The ICC deadline to establish the initial rates is September 28, 2012, with the rates becoming effective no later than 30 days after the ICC’s decision. The initial rates will be effective from October through the end of 2012.

On April 20, 2012, Ameren Illinois filed a request with the ICC to update its annual electric delivery service revenue requirement based on 2011 recoverable costs and expected net plant additions for 2012. The update filing will result in new electric delivery service rates on January 1, 2013. The update filing, as amended in July 2012, requested an annual revenue requirement of $798 million, which, pending ICC approval, would result in an annual decrease of $16 million in Ameren Illinois’ revenues for electric delivery service below the amount Ameren Illinois requested in its January 3, 2012 initial filing. The reduction primarily reflects rate base reductions due to increases in accumulated deferred income taxes as well as a lower return on equity due to decreases in the average 30-year

 

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United States treasury bond rates. In July 2012, the ICC staff submitted its calculation of the revenue requirement included in Ameren Illinois’ update filing. The ICC staff recommended a $776 million electric delivery service revenue requirement, which is $9 million below the amount the ICC staff recommended in the January 3, 2012 initial filing. Other parties also made recommendations through testimony filed in Ameren Illinois’ update filing.

The ICC staff’s positions for both Ameren Illinois’ initial and update filings reflect positions that were included in the ICC’s May 29, 2012 order for Commonwealth Edison Company’s initial filing under the IEIMA’s performance-based formula ratemaking process. In late June 2012, the ICC voted to rehear certain parts of its May 29, 2012 order, including the use of an average rate base as opposed to a year-end rate base and the method for calculating interest on the revenue requirement reconciliation. ICC decisions in the Commonwealth Edison Company’s initial filing, to the extent they are consistent with the facts in Ameren Illinois’ filing, could also impact Ameren Illinois’ formula rates.

The IEIMA provides for an annual reconciliation of the revenue requirement necessary to reflect the actual costs incurred in a given year with the revenue requirement that was in effect for that year. Consequently, Ameren Illinois’ 2012 electric delivery service revenues will be based on its 2012 actual recoverable costs, rate base, and return on common equity as calculated under the IEIMA’s performance-based formula ratemaking framework. As a result, throughout the year, Ameren Illinois will estimate the expected future recovery or return of revenue as a regulatory asset or liability. As of June 30, 2012, Ameren Illinois had recorded a regulatory asset of $12 million with a corresponding increase in electric revenues for the estimated 2012 revenue requirement reconciliation adjustment. By the end of 2012, this regulatory asset will represent Ameren Illinois’ estimate of the probable increase in electric delivery service rates, compared to current and proposed rates, expected to be approved by the ICC to provide Ameren Illinois recovery of all prudently and reasonably incurred costs and an earned rate of return on common equity for 2012. The regulatory asset relating to the 2012 revenue requirement reconciliation will be recovered from customers during 2014.

The IEIMA requires Ameren Illinois to file for ICC approval of its advanced metering infrastructure deployment plan. The advanced metering infrastructure deployment plan outlines how Ameren Illinois will comply with the IEIMA requirement to spend $360 million on smart grid assets over ten years on a cost-beneficial basis to its electric customers. In March 2012, Ameren Illinois submitted its advanced metering infrastructure deployment plan to the ICC, and the ICC subsequently denied that plan in May 2012. The ICC ruled that Ameren Illinois’ plan did not provide enough support to prove that it was cost beneficial for electric customers. Ameren Illinois requested and received a rehearing from the ICC. In its rehearing request, Ameren Illinois submitted a modified advance metering infrastructure deployment plan designed to address the ICC’s concerns about the cost justification of the plan. Ameren Illinois expects to receive an order from the ICC later this year. If approved, the plan targets the second quarter of 2014 to begin installation of smart meters.

Federal

Electric Transmission Investment

In February 2012, FERC approved ATXI’s request for a forward-looking rate calculation with an annual reconciliation adjustment, as well as ATXI’s request for the implementation of the incentives FERC approved in its May 2011 order for the Illinois Rivers project and the Big Muddy River project.

In July 2012, Ameren, on behalf of its transmission affiliates, filed a request with FERC seeking transmission rate incentives for the Spoon River project and the Mark Twain project. Both projects have been approved by MISO. Also in that filing, Ameren requested FERC to authorize Ameren Illinois’ use of a forward-looking rate calculation with an annual reconciliation adjustment for its electric transmission projects. This forward-looking rate calculation is almost identical to the calculation FERC approved in its May 2011 order for ATXI. Ameren expects FERC to issue an order in the third quarter of 2012.

Ameren Missouri Power Purchase Agreement with Entergy Arkansas, Inc.

In May 2012, FERC issued an order upholding its January 2010 ruling that Entergy should not have included additional charges to Ameren Missouri under a 165-megawatt power purchase agreement. Ameren Missouri paid Entergy the additional charges from 2007 through the expiration of the power purchase agreement on August 31, 2009. Pursuant to the order, in June 2012, Entergy paid Ameren Missouri $31 million, with $26 million recorded as a reduction to “Purchased power” expense and $5 million for interest recorded as “Miscellaneous income” in the statement of income. Ameren Missouri expects to refund to customers approximately $2 million of the funds received from Entergy as such funds relate to the period when the FAC was effective and, therefore, such costs were previously included in customer rates. Consequently, Ameren Missouri recorded a $2 million reduction, representing Ameren Missouri’s best estimate of its refund to customers, to its FAC under-recovered asset as of June 30, 2012 with a corresponding increase to expense. As noted above, the MoPSC staff in Ameren Missouri’s pending electric rate case has recommended that the entire Entergy refund be returned to customers through a reduction in base rates over a three-year period. In July 2012, Entergy filed an

 

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appeal of FERC’s order to the United States Court of Appeals for the District of Columbia. A decision from the court is expected in 2013.

Ameren Illinois Electric Transmission Rate Refund

On July 19, 2012, FERC issued an order approving Ameren Illinois’ accounting for the Ameren Illinois Merger. As part of this order, FERC concluded that Ameren Illinois improperly included acquisition premiums, particularly goodwill, in determining its common equity used in its electric transmission formula rate, thereby inappropriately recovering a higher return on rate base from its electric transmission services customers. FERC directed Ameren Illinois to issue a refund within 30 days of the order to its electric transmission services customers for acquisition premiums inappropriately recovered from those customers. As a result of the order, Ameren Illinois expects to record a pretax charge to earnings of between $10 million and $15 million for its obligation to refund to Ameren Illinois’ electric transmission customers during the quarter ended September 30, 2012. In August 2012, Ameren Illinois filed a request for an extension of time to complete the refund. Ameren Illinois is studying the impacts of the FERC order and expects to file a request for rehearing at FERC.

2011 Wholesale Distribution Rate Case

In January 2011, Ameren Illinois filed a request with FERC to increase its annual revenues for electric delivery service for its wholesale customers by $11 million. These wholesale distribution revenues are treated as a deduction from Ameren Illinois’ revenue requirement in retail rate filings with the ICC. In March 2011, FERC issued an order authorizing the proposed rates to take effect, subject to refund when the final rates are determined. Ameren Illinois has reached an agreement with four of its nine wholesale customers. The impasse with the remaining five wholesale customers has resulted in FERC litigation. An initial decision by the FERC administrative law judge is expected in 2012, and a final FERC decision may be received after 2012. We cannot predict the ultimate outcome of this proceeding, but Ameren Illinois does not expect a material impact to its results of operations, financial position, or liquidity.

Combined Construction and Operating License

In 2008, Ameren Missouri filed an application with the NRC for a COL for a new 1,600-megawatt nuclear unit at Ameren Missouri’s existing Callaway County, Missouri, nuclear energy center site. In 2009, Ameren Missouri suspended its efforts to build a new nuclear unit at its existing Missouri nuclear energy center site, and the NRC suspended review of the COL application.

In March 2012, the DOE announced the availability of $452 million of investment funds for the design, engineering, manufacturing, and sale of American-made small modular reactors. In April 2012, Ameren Missouri entered into an agreement with Westinghouse to exclusively support Westinghouse’s application for the DOE’s small modular reactor investment funds. The DOE investment funding is intended to support engineering and design certifications and a COL for up to two small modular reactor designs over five years. Westinghouse submitted its application to the DOE in May 2012. The DOE is expected to issue a decision on awarding the investment funds in the third quarter of 2012.

If Westinghouse is awarded DOE’s small modular reactor investment funds, Ameren Missouri will seek a COL from the NRC for a Westinghouse small modular reactor or multiple reactors at its Callaway energy center site. A COL is issued by the NRC to permit construction and operation of a nuclear power plant at a specific site in accordance with established laws and regulations. Obtaining a COL from the NRC does not obligate Ameren Missouri to build a small modular reactor at the Callaway site; however, it does preserve the option to move forward in a timely fashion should conditions be right to build a small modular reactor in the future. A COL is valid for at least 40 years.

Ameren Missouri estimates the total cost to obtain the small modular reactor COL will be in the range of $80 million to $100 million. Ameren Missouri expects its incremental investment to obtain the small modular reactor COL to be minimal due to several factors, including the company’s capitalized investments in new nuclear energy center development of $69 million as of June 30, 2012, the DOE investment funds that would help support the COL application, and its agreement with Westinghouse. If the DOE does not approve Westinghouse’s application for the small modular reactor investment funds, Ameren Missouri is not obligated to pursue a COL for the Westinghouse small modular reactor design and may terminate its agreement with Westinghouse.

All of Ameren Missouri’s costs incurred to license additional nuclear generation at the Callaway site will remain capitalized while management pursues options to maximize the value of its investment in this project. If efforts are permanently abandoned or management concludes it is probable the costs incurred will be disallowed in rates, a charge to earnings would be recognized in the period in which that determination was made.

 

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NOTE 3 - SHORT-TERM DEBT AND LIQUIDITY

The liquidity needs of the Ameren Companies are typically supported through the use of available cash, short-term intercompany borrowings, drawings under committed bank credit facilities, or commercial paper issuances.

The following table summarizes the borrowing activity and relevant interest rates under the 2010 Missouri Credit Agreement as of June 30, 2012, and excludes issued letters of credit:

 

2010 Missouri Credit Agreement ($800 million)    Ameren (Parent)      Ameren Missouri     Total  

Average daily borrowings outstanding during 2012

   $ -         $ 2      $ 2   

Outstanding credit facility borrowings at period end

     -           -        -   

Weighted-average interest rate during 2012

     -           4.15     4.15

Peak credit facility borrowings during 2012

   $ -         $ 50      $ 50   

Peak interest rate during 2012

     -           4.15     4.15

The 2010 Illinois Credit Agreement and the 2010 Genco Credit Agreement were not utilized for borrowings during the six months ended June 30, 2012. Based on letters of credit issued under the 2010 Credit Agreements as of June 30, 2012, as well as commercial paper outstanding as of such date, the aggregate amount of credit capacity available to Ameren (parent), Ameren Missouri, Ameren Illinois and Genco collectively at June 30, 2012, was $2.06 billion.

Commercial Paper

At June 30, 2012, Ameren had $30 million of commercial paper outstanding. The average daily commercial paper balances outstanding during the six months ended June 30, 2012, and 2011, were $72 million and $338 million, respectively. The weighted-average interest rates during the six months ended June 30, 2012, and 2011, were 0.94% and 0.87%, respectively. The peak short-term commercial paper balances outstanding during the six months ended June 30, 2012, and 2011, were $229 million and $400 million, respectively. The peak interest rates during the six months ended June 30, 2012, and 2011, were 1.25% and 1.46%, respectively.

Indebtedness Provisions and Other Covenants

The information below presents a summary of the Ameren Companies’ compliance with indebtedness provisions and other covenants within the 2010 Credit Agreements. See Note 4 - Credit Facility Borrowings and Liquidity in the Form 10-K for a detailed description of those provisions.

The 2010 Credit Agreements contain conditions about borrowings and issuances of letters of credit, including the absence of default or unmatured default, material accuracy of representations and warranties (excluding any representation after the closing date as to the absence of material adverse change and material litigation), and obtaining required regulatory authorizations. In addition, solely as it relates to borrowings under the 2010 Illinois Credit Agreement, it is a condition for any such borrowing that, at the time of and after giving effect to such borrowing, the borrower not be in violation of any limitation on its ability to incur unsecured indebtedness contained in its articles of incorporation. The 2010 Credit Agreements also contain nonfinancial covenants, including restrictions on the ability to incur liens, to transact with affiliates, to dispose of assets, to make investments in or transfer assets to its affiliates, and to merge with other entities.

The 2010 Credit Agreements require each of Ameren, Ameren Missouri, Ameren Illinois and Genco to maintain consolidated indebtedness of not more than 65% of its consolidated total capitalization pursuant to a defined calculation set forth in the agreements. As of June 30, 2012, the ratios of consolidated indebtedness to total consolidated capitalization, calculated in accordance with the provisions of the 2010 Credit Agreements, were 48%, 48%, 41% and 45%, for Ameren, Ameren Missouri, Ameren Illinois and Genco, respectively. In addition, under the 2010 Genco Credit Agreement and the 2010 Illinois Credit Agreement, Ameren is required to maintain a ratio of consolidated funds from operations plus interest expense to consolidated interest expense of 2.0 to 1, to be calculated quarterly, as of the end of the most recent four fiscal quarters then ending, in accordance with the 2010 Genco Credit Agreement and the 2010 Illinois Credit Agreement, as applicable. Ameren’s ratio as of June 30, 2012, was 5.1 to 1. Failure of a borrower to satisfy a financial covenant constitutes an immediate default under the applicable 2010 Credit Agreement.

None of the Ameren Companies’ credit facilities or financing arrangements contains credit rating triggers that would cause an event of default or acceleration of repayment of outstanding balances. Management believes that the Ameren Companies were in compliance with the provisions and covenants of their credit facilities at June 30, 2012.

Money Pools

Ameren has money pool agreements with and among its subsidiaries to coordinate and provide for certain short-term cash and working capital requirements. Separate money pools are maintained for utility and non-state-regulated entities. Ameren Services is responsible for the operation and administration of the money pool agreements.

 

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Utility

Ameren Missouri, Ameren Illinois and Ameren Services may participate in the utility money pool as both lenders and borrowers. Ameren and AERG may participate in the utility money pool only as lenders. Internal funds are surplus funds contributed to the utility money pool from participants. The primary sources of external funds for the utility money pool are the 2010 Credit Agreements and the commercial paper programs. The total amount available to the pool participants from the utility money pool at any given time is reduced by the amount of borrowings made by participants, but is increased to the extent that the pool participants advance surplus funds to the utility money pool or remit funds from other external sources. The availability of funds is also determined by funding requirement limits established by regulatory authorizations. The utility money pool was established to coordinate and to provide short-term cash and working capital for the participants. Participants receiving a loan under the utility money pool agreement must repay the principal amount of such loan, together with accrued interest. The rate of interest depends on the composition of internal and external funds in the utility money pool. The average interest rate for borrowing under the utility money pool for the three and six months ended June 30, 2012, was 0.14% and 0.12%, respectively. There were no utility money pool borrowings during the three and six months ended June 30, 2011.

Non-state-regulated Subsidiaries

Ameren, Ameren Services, AER, Genco, AERG, Marketing Company, and other non-state-regulated Ameren subsidiaries have the ability, subject to Ameren parent company and applicable regulatory short-term borrowing authorizations, to access funding from the 2010 Credit Agreements and the commercial paper programs through a non-state-regulated subsidiary money pool agreement. All participants may borrow from or lend to the non-state-regulated money pool, except for Ameren Services, which may participate only as a borrower. The total amount available to the pool participants from the non-state-regulated subsidiary money pool at any given time is reduced by the amount of borrowings made by participants, but is increased to the extent that the pool participants advance surplus funds to the non-state-regulated subsidiary money pool or remit funds from other external sources. The non-state-regulated subsidiary money pool was established to coordinate and to provide short-term cash and working capital for the participants. Participants receiving a loan under the non-state-regulated subsidiary money pool agreement must repay the principal amount of such loan, together with accrued interest. The rate of interest depends on the composition of internal and external funds in the non-state-regulated subsidiary money pool. The average interest rate for borrowing under the non-state-regulated subsidiary money pool for the three and six months ended June 30, 2012, was 0.64% and 0.70%, respectively (2011 - 0.72% and 0.93%, respectively).

See Note 8 - Related Party Transactions for the amount of interest income and expense from the money pool arrangements recorded by the Ameren Companies for the three and six months ended June 30, 2012, and 2011.

NOTE 4 - LONG-TERM DEBT AND EQUITY FINANCINGS

Ameren Illinois

On July 30, 2012, Ameren Illinois commenced a tender offer to purchase for cash its outstanding 9.75% senior secured notes due 2018 and its outstanding 6.25% senior secured notes due 2018 for an aggregate purchase price (including principal and premium) of up to $450 million. Any validly tendered 9.75% senior secured notes will have priority over and be accepted for purchase before any validly tendered 6.25% senior secured notes. The tender offer is scheduled to expire on August 24, 2012, unless extended or earlier terminated by Ameren Illinois.

Indenture Provisions and Other Covenants

Ameren Missouri’s and Ameren Illinois’ indentures and articles of incorporation include covenants and provisions related to issuances of first mortgage bonds and preferred stock. Ameren Missouri and Ameren Illinois are required to meet certain ratios to issue additional first mortgage bonds and preferred stock. However, a failure to achieve these ratios would not result in a default under these covenants and provisions, but would restrict the companies’ ability to issue bonds or preferred stock. The following table summarizes the required and actual interest coverage ratios for interest charges and dividend coverage ratios and bonds and preferred stock issuable for the 12 months ended June 30, 2012, at an assumed interest rate of 6% and dividend rate of 7%.

 

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      Required Interest
Coverage Ratio(a)
   Actual Interest
Coverage Ratio
     Bonds Issuable(b)     Required Dividend
Coverage Ratio(c)
   Actual Dividend
Coverage Ratio
     Preferred Stock
Issuable
 

Ameren Missouri

   >2.0      3.7       $ 2,780      >2.5      100.3       $ 1,912   

Ameren Illinois

   >2.0      7.1         3,514 (d)    >1.5      3.0         203   

 

(a) Coverage required on the annual interest charges on first mortgage bonds outstanding and to be issued. Coverage is not required in certain cases when additional first mortgage bonds are issued on the basis of retired bonds.
(b) Amount of bonds issuable based either on required coverage ratios or unfunded property additions, whichever is more restrictive. The amounts shown also include bonds issuable based on retired bond capacity of $89 million and $765 million at Ameren Missouri and Ameren Illinois, respectively.
(c) Coverage required on the annual dividend on preferred stock outstanding and to be issued, as required in the respective company’s articles of incorporation.
(d) Amount of bonds issuable by Ameren Illinois based on unfunded property additions and retired bonds solely under the former IP mortgage indenture.

Ameren’s indenture does not require Ameren to comply with any quantitative financial covenants. The indenture does, however, include certain cross-default provisions. Specifically, either (1) the failure by Ameren to pay when due and upon expiration of any applicable grace period any portion of any Ameren indebtedness in excess of $25 million or (2) the acceleration upon default of the maturity of any Ameren indebtedness in excess of $25 million under any indebtedness agreement, including the 2010 Credit Agreements, constitutes a default under the indenture, unless such past due or accelerated debt is discharged or the acceleration is rescinded or annulled within a specified period.

Ameren Missouri, Ameren Illinois, Genco and certain other nonregistrant Ameren subsidiaries are subject to Section 305(a) of the Federal Power Act, which makes it unlawful for any officer or director of a public utility, as defined in the Federal Power Act, to participate in the making or paying of any dividend from any funds “properly included in capital account.” The meaning of this limitation has never been clarified under the Federal Power Act or FERC regulations. However, FERC has consistently interpreted the provision to allow dividends to be paid as long as (1) the source of the dividends is clearly disclosed, (2) the dividends are not excessive, and (3) there is no self-dealing on the part of corporate officials. At a minimum, Ameren believes that dividends can be paid by its subsidiaries that are public utilities from net income and retained earnings. In addition, under Illinois law, Ameren Illinois may not pay any dividend on its stock, unless, among other things, its earnings and earned surplus are sufficient to declare and pay a dividend after provision is made for reasonable and proper reserves, or unless Ameren Illinois has specific authorization from the ICC.

Ameren Illinois’ articles of incorporation require its dividend payments on common stock to be based on ratios of common stock to total capitalization and other provisions related to certain operating expenses and accumulations of earned surplus. Ameren Illinois committed to FERC to maintain a minimum 30% ratio of common stock equity to total capitalization after the Ameren Illinois Merger and AERG distribution. As of June 30, 2012, Ameren Illinois’ ratio of common stock equity to total capitalization was 58%.

Genco’s indenture includes provisions that require Genco to maintain certain interest coverage and debt-to-capital ratios in order for Genco to pay dividends, to make principal or interest payments on subordinated borrowings, to make loans to or investments in affiliates, or to incur additional external, third party indebtedness. The following table summarizes these ratios for the 12 months ended and as of June 30, 2012:

 

     

Required

Interest
Coverage
Ratio

 

Actual

Interest
Coverage
Ratio

    

Required

Debt-to-
Capital
Ratio

 

Actual

Debt-to-
Capital
Ratio

 

Genco

   >1.75(a)/2.50(b)     3.39       <60%(b)     43

 

(a) A minimum interest coverage ratio of 1.75 is required for Genco to make certain restricted payments, as defined, including specified dividend payments and, principal and interest payments on subordinated borrowings. As of the date of the restricted payment, the minimum ratio must have been achieved for the most recently ended four fiscal quarters and projected by management to be achieved for each of the subsequent four six-month periods. Investments in the non-state-regulated subsidiary money pool and repayments of non-state-regulated subsidiary money pool borrowings are not subject to this incurrence test.
(b) A minimum interest coverage ratio of 2.50 for the most recently ended four fiscal quarters and a debt-to-capital ratio of no greater than 60% are required for Genco to incur additional indebtedness, as defined, other than permitted indebtedness, as defined, for borrowed money. The ratios must be computed on a pro forma basis considering the additional indebtedness to be incurred and the related interest expense. Non-state-regulated subsidiary money pool borrowings are defined as permitted indebtedness and are not subject to these incurrence tests. Credit facility borrowings, including borrowings under the 2010 Genco Credit Agreement, and other borrowings from third-party, external sources are included in the definition of indebtedness and are subject to these incurrence tests.

Genco’s debt incurrence-related ratio restrictions under its indenture may be disregarded if both Moody’s and S&P reaffirm the ratings of Genco in place at the time of the debt incurrence after considering the additional indebtedness.

Under the provisions of Genco’s indenture, Genco may not borrow additional funds from external, third-party sources if its interest coverage ratio is less than a specified minimum or its leverage ratio is greater than a specified maximum. Based on projections as of June 30, 2012, of Genco’s operating results and cash flows, we expect that, by the end of the first quarter of 2013, Genco’s interest coverage ratio will be less than the minimum ratio required for the company to borrow additional funds from external, third-party sources.

 

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Genco’s indenture does not restrict intercompany borrowings from Ameren’s non-state-regulated subsidiary money pool. However, borrowings from the money pool are subject to Ameren’s control and, if a Genco intercompany financing need were to arise, borrowings from the non-state-regulated subsidiary money pool by Genco would be dependent on consideration by Ameren of the facts and circumstances existing at that time.

In order for the Ameren Companies to issue securities in the future, they will have to comply with all applicable requirements in effect at the time of any such issuances.

Off-Balance-Sheet Arrangements

At June 30, 2012, none of the Ameren Companies had any off-balance-sheet financing arrangements, other than operating leases entered into in the ordinary course of business. None of the Ameren Companies expect to engage in any significant off-balance-sheet financing arrangements in the near future.

NOTE 5 - OTHER INCOME AND EXPENSES

The following table presents the components of “Other Income and Expenses” in Ameren’s, Ameren Missouri’s, and Ameren Illinois’ statement of income (loss) and statements of income and comprehensive income for the three and six months ended June 30, 2012, and 2011:

 

      Three Months      Six Months  
      2012      2011      2012      2011  

Ameren:(a)

           

Miscellaneous income:

           

Allowance for equity funds used during construction

   $ 8       $ 9       $ 17       $ 15   

Interest income on industrial development revenue bonds

     7         7         14         14   

Interest and dividend income(b)

     5         1         5         2   

Other

     -         -         1         2   

Total miscellaneous income

   $ 20       $ 17       $ 37       $ 33   

Miscellaneous expense:

           

Donations(c)

   $ 3       $ 1       $ 15       $ 3   

Other

     4         4         7         7   

Total miscellaneous expense

   $ 7       $ 5       $ 22       $ 10   

Ameren Missouri:

           

Miscellaneous income:

           

Allowance for equity funds used during construction

   $ 7       $ 8       $ 15       $ 14   

Interest income on industrial development revenue bonds

     7         7         14         14   

Interest and dividend income(b)

     4         1         4         1   

Total miscellaneous income

   $ 18       $ 16       $ 33       $ 29   

Miscellaneous expense:

           

Donations

   $ 3       $ 1       $ 5       $ 2   

Other

     1         2         2         4   

Total miscellaneous expense

   $ 4       $ 3       $ 7       $ 6   

Ameren Illinois:

           

Miscellaneous income:

           

Allowance for equity funds used during construction

   $ 1       $ 1       $ 2       $ 1   

Interest and dividend income

     -         -         -         1   

Other

     1         -         1         1   

Total miscellaneous income

   $ 2       $ 1       $ 3       $ 3   

Miscellaneous expense:

           

Donations(c)

   $ -       $ -       $ 10       $ -   

Other

     2         1         3         2   

Total miscellaneous expense

   $ 2       $ 1       $ 13       $ 2   

 

(a) Includes amounts for Ameren registrant and nonregistrant subsidiaries and intercompany eliminations.
(b) Includes interest income relating to a refund of charges included in an expired power purchase agreement with Entergy. See Note 2 - Rate and Regulatory Matters for additional information.
(c) Includes Ameren Illinois’ one-time $7.5 million donation and $1 million annual donation to the Illinois Science and Energy Innovation Trust and $1 million annual donation for customer assistance programs pursuant to the IEIMA as a result of Ameren Illinois’ participation in the formula ratemaking process.

 

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NOTE 6 - DERIVATIVE FINANCIAL INSTRUMENTS

We use derivatives principally to manage the risk of changes in market prices for natural gas, coal, diesel, electricity, and uranium. Such price fluctuations may cause the following:

 

   

an unrealized appreciation or depreciation of our contracted commitments to purchase or sell when purchase or sale prices under the commitments are compared with current commodity prices;

 

   

market values of coal, natural gas, and uranium inventories that differ from the cost of those commodities in inventory; and

 

   

actual cash outlays for the purchase of these commodities that differ from anticipated cash outlays.

The derivatives that we use to hedge these risks are governed by our risk management policies for forward contracts, futures, options, and swaps. Our net positions are continually assessed within our structured hedging programs to determine whether new or offsetting transactions are required. The goal of the hedging program is generally to mitigate financial risks while ensuring that sufficient volumes are available to meet our requirements. Contracts we enter into as part of our risk management program may be settled financially, settled by physical delivery, or net settled with the counterparty.

The following table presents open gross derivative volumes by commodity type as of June 30, 2012, and December 31, 2011:

 

      Quantity (in millions, except as indicated)  
Commodity    NPNS
Contracts
(a)
    Cash Flow
Hedges
(b)
    Other
Derivatives
(c)
   

Derivatives That

Qualify for
Regulatory Deferral
(d)

 
     2012     2011     2012     2011     2012     2011     2012     2011  

Coal (in tons)

                

Ameren Missouri

     106        116        (e     (e     -        (e     (e     (e

Genco

     31        24        (e     (e     5        (e     (e     (e

Other(f)

     9        7        (e     (e     1        (e     (e     (e

Ameren

     146        147        (e     (e     6        (e     (e     (e

Fuel oils (in gallons)(g)

                

Ameren Missouri

     (e     (e     (e     (e     (e     (e     59        53   

Genco

     (e     (e     (e     (e     43        27        (e     (e

Other(f)

     (e     (e     (e     (e     12        9        (e     (e

Ameren

     (e     (e     (e     (e     55        36        59        53   

Natural gas (in mmbtu)

                

Ameren Missouri

     6        8        (e     (e     16        9        22        19   

Ameren Illinois

     27        42        (e     (e     (e     (e     153        174   

Genco

     (e     (e     (e     (e     26        7        (e     (e

Other(f)

     (e     (e     (e     (e     1        1        (e     (e

Ameren

     33        50        (e     (e     43        17        175        193   

Power (in megawatthours)

                

Ameren Missouri

     4        1        (e     (e     1        1        13        6   

Ameren Illinois

     22        11        (e     (e     (e     (e     19        24   

Genco

     (e     (e     (e     (e     -        -        (e     (e

Other(f)

     69        61        17        17        56        30        (4     (9

Ameren

     95        73        17        17        57        31        28        21   

Uranium (pounds in thousands)

                

Ameren Missouri & Ameren

     5,361        5,553        (e     (e     (e     (e     131        148   

 

(a) Contracts through December 2017, March 2015, September 2035, and October 2024 for coal, natural gas, power, and uranium, respectively, as of June 30, 2012.
(b) Contracts through December 2016 for power as of June 30, 2012.
(c) Contracts through December 2014, October 2016, April 2015, and December 2016 for coal, fuel oils, natural gas, and power, respectively, as of June 30, 2012.
(d) Contracts through October 2014, October 2016, May 2032, and December 2013 for fuel oils, natural gas, power, and uranium, respectively, as of June 30, 2012.
(e) Not applicable.
(f) Includes AERG contracts for coal and fuel oils, Marketing Company contracts for natural gas and power, and intercompany eliminations for power.
(g) Fuel oils consist of heating and crude oil.

Authoritative guidance regarding derivative instruments requires that all contracts considered to be derivative instruments be recorded on the balance sheet at their fair values, unless the NPNS exception applies. See Note 7 - Fair Value Measurements for our methods of assessing the fair value of derivative instruments. Many of our physical contracts, such as our coal and purchased power contracts, qualify for the NPNS exception to derivative accounting rules. The revenue or expense on NPNS contracts is recognized at the contract price upon physical delivery.

 

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If we determine that a contract meets the definition of a derivative and is not eligible for the NPNS exception, we review the contract to determine if it qualifies for hedge accounting. We also consider whether gains or losses resulting from such derivatives qualify for regulatory deferral. Contracts that qualify for cash flow hedge accounting are recorded at fair value with changes in fair value charged or credited to accumulated OCI in the period in which the change occurs, to the extent the hedge is effective. To the extent the hedge is ineffective, the related changes in fair value are charged or credited to the statement of income or the statement of income and comprehensive income in the period in which the change occurs. When the contract is settled or delivered, the net gain or loss is recorded in the statement of income or the statement of income and comprehensive income.

Derivative contracts that qualify for regulatory deferral are recorded at fair value, with changes in fair value recorded as regulatory assets or regulatory liabilities in the period in which the change occurs. Ameren Missouri and Ameren Illinois believe derivative gains and losses deferred as regulatory assets and regulatory liabilities are probable of recovery or refund through future rates charged to customers. Regulatory assets and regulatory liabilities are amortized to operating income as related losses and gains are reflected in rates charged to customers. Therefore, gains and losses on these derivatives have no effect on operating income.

Certain derivative contracts are entered into on a regular basis as part of our risk management program but do not qualify for the NPNS exception, hedge accounting, or regulatory deferral accounting. Such contracts are recorded at fair value, with changes in fair value charged or credited to the statement of income or the statement of income and comprehensive income in the period in which the change occurs.

Authoritative accounting guidance permits companies to offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a liability) against fair value amounts recognized for derivative instruments that are executed with the same counterparty under the same master netting arrangement. The Ameren Companies did not elect to adopt this guidance for any eligible financial instruments or other items.

The following table presents the carrying value and balance sheet location of all derivative instruments as of June 30, 2012, and December 31, 2011:

 

      Balance Sheet Location    Ameren(a)     Ameren Missouri     Ameren Illinois     Genco  

2012:

        

Derivative assets designated as hedging instruments

        

Commodity contracts:

           

Power

   MTM derivative assets    $ 23      $ (b   $ (b   $ (b
   Other assets      31        -        -        -   
     Total assets    $ 54      $ -      $ -      $ -   

Derivative liabilities designated as hedging instruments

        

Commodity contracts:

           

Power

   MTM derivative liabilities    $ 1      $ (b   $ -      $ (b
     Total liabilities    $ 1      $ -      $ -      $ -   

Derivative assets not designated as hedging instruments(c)

        

Commodity contracts:

           

Fuel oils

   MTM derivative assets    $ 13      $ (b   $ (b   $ (b
   Other current assets      -        8        -        4   
   Other assets      5        4        -        1   

Natural gas

   MTM derivative assets      10        (b     (b     (b
   Other current assets      -        2        2        5   
   Other assets      -        -        -        -   

Power

   MTM derivative assets      110        (b     (b     (b
   Other current assets      -        39        -        -   
     Other assets      35        2        -        -   
     Total assets    $ 173      $ 55      $ 2      $ 10   

Derivative liabilities not designated as hedging instruments(c)

        

Commodity contracts:

           

Coal

   MTM derivative liabilities    $ 4      $ (b   $ -      $ (b
   Other current liabilities      -        -        -        4   
   Other deferred credits and liabilities      6        -        -        4   

Fuel oils

   MTM derivative liabilities      5        (b     -        (b
   Other current liabilities      -        2        -        2   
   Other deferred credits and liabilities      6        2        -        3   

Natural gas

   MTM derivative liabilities      91        (b     78        (b
   Other current liabilities      -        12        -        1   
   Other deferred credits and liabilities      77        11        66        -   

Power

   MTM derivative liabilities      96        (b     19        (b
     MTM derivative liabilities - affiliates      (b     (b     114        (b

 

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      Balance Sheet Location    Ameren(a)     Ameren Missouri     Ameren Illinois