Ameren Restructuring – Analyst Blog

Ameren Corporation (AEE) plans to reorganize its three Illinois electric and gas utilities − AmerenCIPS, AmerenCILCO and AmerenIP − into a single public utility that would do business as “Ameren Illinois.”

 

As the first step in accomplishing this reorganization, Ameren and its subsidiaries will file an application with the Federal Energy Regulatory Commission (FERC) and notices with the Illinois Commerce Commission (ICC). The Ameren Illinois utilities intend to complete the reorganization by October 1, 2010.

 

The merged entity would be a direct subsidiary of Ameren. The reorganization would not affect current rates customers pay or levels of service. The merger of the utilities will reduce cost of operations and gain operational efficiency.

 

Ameren’s stable and regulated electric power operations in the Midwest generate a relatively stable and growing earnings stream. Future growth will be guided by improved plant operations, higher rates in Missouri and Illinois, lower operations and maintenance expenses, and installation of emission reduction equipment (scrubbers) at its generation plants.

 

In light of the current tepid economy, Ameren has focused its capital expenditure on its regulated businesses. It has also reduced approximately $1 billion in merchant generation capital expenditures for the period between 2010 through 2013. This will conserve liquidity and help alleviate the debt load in the current tight capital markets.

 

St Louis, Missouri-based Ameren is a regulated public utility holding company with subsidiaries operating rate regulated electric generation, transmission and distribution businesses, rate regulated natural gas distribution businesses and non rate-regulated electric generation businesses in Missouri and Illinois.

 

Ameren serves over 2.4 million electric consumers and over 1 million natural gas customers in Missouri and Illinois through its principal subsidiaries – Union Electric Company, Central Illinois Public Service Company, Ameren Energy Generating Company, and Central Illinois Light Company.

 

Ameren has a generation capacity of 16,800 MW. The company’s unregulated generation portfolio consists of nearly 7,000 MW of primarily coal-fired power plants, of which a significant portion is contracted to serve Ameren’s utilities. We maintain our market Neutral recommendation on the stock.