Ameren Corporation 2014 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2014. The filing is an annual Form 10-K, not a standalone fourth-quarter filing, and covers Ameren Corporation, Union Electric Company d/b/a Ameren Missouri, and Ameren Illinois Company. Ameren is a regulated utility holding company with electric generation, transmission and distribution, natural gas distribution, and FERC-regulated transmission operations in Missouri and Illinois. Results generally exclude discontinued operations unless noted.
Business Context
- Reportable segments are Ameren Missouri and Ameren Illinois; ATXI conducts FERC-regulated transmission activities and is included in “Other.”
- Ameren completed the divestiture of New AER in December 2013 and sold the Elgin, Gibson City, and Grand Tower gas-fired plants to Rockland Capital in January 2014. These operations are presented as discontinued operations.
- Ameren had 8,527 employees at December 31, 2014. Approximately 55% were represented by labor unions.
Financial and Operating Metrics
| Ameren consolidated, $ millions except per-share data | 2014 | 2013 | Change |
|---|---|---|---|
| Operating revenues | $6,053 | $5,838 | +$215 |
| Operating income | $1,254 | $1,184 | +$70 |
| Income from continuing operations | $593 | $518 | +$75 |
| Net income attributable to Ameren | $586 | $289 | +$297 |
| Diluted EPS from continuing operations | $2.40 | $2.10 | +$0.30 |
| Diluted EPS | $2.40 | $1.18 | +$1.22 |
| Common dividends | $390 | $388 | +$2 |
| Cash flow from continuing operations | $1,557 | $1,636 | -$79 |
| Capital expenditures | $1,785 | $1,379 | +$406 |
| Long-term debt, excluding current maturities | $6,120 | $5,504 | +$616 |
| Total assets | $22,676 | $21,042 | +$1,634 |
Operating margin was approximately 20.7% in 2014 versus 20.3% in 2013, based on reported operating income and revenues. Net margin was approximately 9.7% in 2014 versus 4.9% in 2013; the comparison is significantly affected by the 2013 discontinued-operations loss.
- Electric margins increased $148 million, or 4%, and natural gas margins increased $45 million, or 9%.
- Ameren Missouri reported operating revenues of $3,553 million, operating income of $785 million, and net income available to common stockholders of $390 million.
- Ameren Illinois reported operating revenues of $2,498 million, operating income of $450 million, and net income available to common stockholders of $201 million.
- Cash from operating activities was $1,557 million, compared with $1,856 million used in investing activities and $390 million of common dividends.
- Cash and cash equivalents were $5 million at year-end. The company had approximately $1.4 billion of available liquidity under cash and committed credit facilities, including $1.373 billion available under $2.1 billion of amended credit agreements expiring December 11, 2019.
- Commercial paper outstanding was $714 million at year-end, including $585 million at the parent, $97 million at Ameren Missouri, and $32 million at Ameren Illinois.
- Consolidated long-term debt, including current maturities, was approximately $6.25 billion. Debt issuances totaled $898 million, while redemptions and maturities totaled $697 million.
Material Changes Versus 2013
- Continuing-operations earnings rose primarily because of higher Ameren Illinois electric delivery and transmission earnings, higher Illinois natural gas rates, lower interest expense, increased MEEIA recovery, and colder winter weather.
- Ameren Illinois electric margins increased $98 million and natural gas margins increased $44 million, driven by rate-base growth, formula ratemaking, higher gas rates, and weather.
- Ameren Missouri electric margins increased $36 million, helped by the absence of a 2013 FAC prudence-review charge and increased MEEIA recovery, partly offset by lower retail sales from energy-efficiency programs.
- Operations and maintenance expense increased $74 million, while depreciation and amortization increased $39 million, reflecting infrastructure additions, labor, litigation, reliability, and energy-efficiency costs.
- Interest expense decreased $57 million, primarily because higher-cost debt was refinanced or matured and was replaced with lower-cost debt.
- Cash flow from operations declined despite higher margins because of customer refunds, higher coal purchases, energy-efficiency and solar-rebate spending, under-recovered fuel and purchased-power costs, and increased infrastructure activity.
- Capital spending increased 29% to $1.785 billion, led by transmission, reliability, environmental, Callaway, and Illinois modernization projects.
- Discontinued-operations losses declined to $1 million from $223 million in 2013. The 2013 amount included the $201 million pretax loss on the New AER divestiture.
Guidance, Outlook, Risks and Unusual Items
- Ameren projected 2015–2019 capital spending of approximately $8.6 billion to $9.3 billion, including up to $3.9 billion for Ameren Missouri, $4.0 billion for Ameren Illinois, and $1.4 billion for ATXI.
- Ameren expects capital expenditures and dividends to exceed operating cash flow over the next several years and intends to fund the shortfall through cash, commercial paper, and debt markets. Management did not expect a need for public equity issuance, but retained the option to issue shares through employee and dividend reinvestment plans.
- Ameren Missouri’s pending electric rate case sought an annual revenue increase of approximately $190 million; Missouri staff recommended $89 million. A decision was expected by May 2015, with rates effective by June 2015.
- Ameren Illinois filed for a $53 million natural gas delivery revenue increase, with a decision expected by December 2015 and rates expected in January 2016. It also received approval for a qualifying infrastructure plant rider.
- FERC proceedings challenge the 12.38% allowed base return on equity for MISO transmission owners. Ameren recorded reserves for estimated refunds. A 50-basis-point reduction was estimated to reduce 2015 Ameren earnings by approximately $4 million and Ameren Illinois earnings by approximately $2 million.
- Ameren Illinois’ formula-rate return depends on 30-year Treasury yields plus 580 basis points; a 50-basis-point change in Treasury yields was estimated to change 2015 net income by approximately $6 million.
- Ameren faces significant environmental uncertainty, including the proposed Clean Power Plan, Mercury and Air Toxics Standards, coal combustion residual requirements, cooling-water rules, and Clean Air Act litigation concerning the Rush Island plant. The proposed Clean Power Plan could require approximately $2 billion of additional or accelerated generation investment by 2020 if finalized substantially as proposed.
- Ameren Illinois estimated former manufactured-gas-plant remediation obligations at $250 million to $314 million and recorded a $250 million liability.
- Ameren Missouri had a $41 million insurance receivable related to the Taum Sauk reservoir breach that remained subject to litigation.
- Ameren had an unfunded pension and postretirement obligation of $710 million at year-end and estimated aggregate pension contributions of approximately $290 million over the next five years.
- Ameren retained $114 million of guarantees and $9 million of letters of credit supporting New AER obligations through December 2, 2015; indemnification from IPH and Dynegy may not cover all losses.
- Callaway relicensing and $69 million of capitalized costs for potential additional nuclear generation remain subject to regulatory and management decisions. Abandonment or disallowance could result in an earnings charge.
Most Important Facts to Verify
- Final outcomes of Ameren Missouri’s electric rate case and Ameren Illinois’ natural gas rate case.
- FERC decisions on the MISO return-on-equity complaints and the amount and timing of any required transmission refunds.
- Actual environmental compliance costs, especially under greenhouse-gas, coal-ash, cooling-water, and Clean Air Act requirements, and the extent of recovery through customer rates.
- Ameren’s ability to fund projected capital spending while maintaining credit ratings, liquidity, and dividend payments.
- Recovery of the $41 million Taum Sauk insurance receivable and resolution of related litigation.
- Remediation cost increases for Ameren Illinois’ former manufactured-gas-plant sites and asbestos claims.
- Future pension contributions and the sensitivity of benefit obligations to interest rates, asset returns, and mortality assumptions.
- Whether the IEIMA formula-ratemaking framework is extended beyond its scheduled 2017 sunset and how its performance requirements affect earnings.