Business Context and Reporting Period
This Form 8-K is a Current Report filed by Ameren Corporation and its subsidiary, Illinois Power Company (IP), on October 20, 2008. The filing provides preliminary results of operations for the third quarter ended September 30, 2008, and updates on liquidity and financing activities.
Key Financial Metrics and Liquidity
Illinois Power Company (IP):
- Net Income: Expected to increase compared to the same period in 2007.
- Outstanding Borrowings: As of September 30, 2008, IP had $304 million outstanding under credit facilities. Collectively, the "Illinois Borrowers" had $832 million outstanding.
- Credit Facilities: Access to two separate $500 million credit facilities and Ameren's $1.15 billion utility money pool (which had $275 million outstanding as of September 30, 2008).
Ameren Corporation:
- Net Income: Consolidated net income is expected to decrease compared to the prior-year period.
- Non-GAAP Adjustments: GAAP net income is expected to be reduced by net unrealized mark-to-market losses from nonqualifying hedges and costs associated with the 2007 Illinois electric settlement agreement.
Material Changes Versus Prior Period
Illinois Power Company (IP):
- Positive Drivers: Implementation of redesigned seasonal electric delivery service rates (effective January 1, 2008) and reduced impact of the 2007 Illinois electric settlement agreement.
- Negative Drivers: Unfavorable weather conditions, higher bad debt, and increased interest expenses.
Ameren Corporation:
- Negative Drivers: Unfavorable weather conditions and increased operations and maintenance expenses.
- Positive Drivers: Implementation of redesigned seasonal electric delivery service rates in Illinois.
Guidance, Outlook, and Risks
Guidance and Outlook:
- Ameren expects to narrow its full-year core (non-GAAP) earnings per share guidance in early November, within the range provided on August 1, 2008.
- IP believes it will have sufficient liquidity to finance operations through the end of 2009, assuming the refinancing of $250 million of 7.50% Series Mortgage Bonds due in 2009 and the completion of the Senior Secured Notes sale.
Financing Activities:
- IP intends to privately offer Senior Secured Notes to qualified institutional buyers and accredited investors.
- Proceeds from the notes will be used to repay outstanding borrowings under credit facilities and the Ameren utility money pool.
Risks and Contingencies:
- Results for the third quarter are not necessarily indicative of full-year results.
- Forward-looking statements are subject to risks and uncertainties that could cause actual performance to differ materially from projections.
- Ameren cannot estimate the future GAAP earnings impact of certain items, such as the Missouri Public Service Commission storm cost-related order or net mark-to-market gains/losses.
Investor Verification Checklist
- Verify the final third-quarter 2008 earnings release in early November for confirmed GAAP and non-GAAP figures.
- Confirm the successful issuance and pricing of the proposed IP Senior Secured Notes.
- Monitor the refinancing status of the $250 million of 7.50% Series Mortgage Bonds due in 2009.
- Review the updated full-year core earnings per share guidance range upon its release.
- Assess the impact of ongoing weather conditions and fuel costs on future operational expenses.