Ameren Corporation’s (AEE) newly formed subsidiary, Ameren Transmission Company (“ATX”), and Ameren’s utility operating companies, Ameren Illinois and Ameren Missouri, have received approval from the Federal Energy Regulatory Commission (“FERC”) for rate increases to cover the $1.0 billion cost of their power transmission projects.
The FERC had granted pre-approval of certain rate treatments for a significant portion of the company’s proposed initial portfolio of transmission projects, the Grand Rivers Phase 1 projects. These include the Illinois Rivers and the Big Muddy River Projects with a combined investment opportunity of more than $1.0 billion.
The FERC has approved full recovery of financing costs associated with construction work in progress, recovery of prudently incurred costs in developing project facilities that might later be abandoned due to issues outside the company’s control, use of a capital structure that reflects the capital structure of the Ameren Illinois Company as of December 31, 2009 and also resembles a capital structure of a utility company. The commission has also permitted ATX to recover operating and maintenance costs incurred in the early development stages of the projects.
The Illinois Rivers Project is a 331-mile, 345,000-volt project that extends from northeast Missouri to the Mississippi River and across north central Illinois to the Indiana border. The 345,000-volt, 185-mile Big Muddy River Project consists of four line segments in southern Illinois, with one segment also crossing the Mississippi River and into southern Missouri. Ameren Energy Resources’ Grand Tower Plant is the center point of the project. Final approval of these projects is subject to their inclusion in the regional system plan of the Midwest Independent Transmission System Operator, Inc., (Midwest ISO).
Ameren’s newly formed transmission company, ATX will invest in electric transmission infrastructure to expand Ameren’s robust transmission system that covers Missouri and Illinois. Its transmission projects will be built initially within Illinois and Missouri, with the potential for expanding to other areas in the future. The company has transmission investment opportunities of more than $3 billion that could be completed in two states over the next 10 to 15 years. The transmission rates of ATX would be regulated by the FERC under the Midwest ISO tariff.
Ameren Corp. is supported by consistent performances across its solid base of stable utility operations in the Midwestern market, as well as its focus on cost minimization, and the strong balance sheet.
However, valuation continues to be restrained by merchant generation, its predominantly coal-based generation assets and pending regulatory cases. The company presently retains a short-term Zacks #4 Rank (Sell). We have a long-term Neutral recommendation on the stock.
St. Louis based Ameren Corporation is a holding company which operates in the generation and distribution of electricity and natural gas to residential, commercial, industrial and wholesale end markets in Missouri and Illinois. Through its utility subsidiaries, the company distributes electricity to 2.4 million customers and natural gas to approximately 1 million customers in Missouri and Illinois. The company mainly competes with CenterPoint Energy, Inc. (CNP) and Exelon Corp. (EXC).
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