Ameren Corporation 2013 Form 10-K Summary
Business context and reporting period
This combined Form 10-K covers Ameren Corporation, Union Electric Company doing business as Ameren Missouri, and Ameren Illinois Company for the fiscal year ended December 31, 2013. Ameren is a regulated utility holding company serving approximately 2.4 million electric and 0.9 million natural-gas customers in Missouri and Illinois. Its reportable segments are Ameren Missouri and Ameren Illinois, with additional transmission operations through Ameren Transmission Company of Illinois.
The filing is an annual report rather than a quarterly Q4 filing, although it includes unaudited fourth-quarter information. Ameren completed the divestiture of substantially all of its merchant-generation business, New AER, to Illinois Power Holdings on December 2, 2013, and is now focused primarily on rate-regulated electric, gas, and transmission operations.
Key financial metrics
| Metric | 2013 | 2012 | Change |
|---|---|---|---|
| Operating revenues | $5.838 billion | $5.781 billion | Up $57 million |
| Operating income | $1.184 billion | $1.188 billion | Down $4 million |
| Income from continuing operations | $518 million | $522 million | Down $4 million |
| Net income attributable to Ameren | $289 million | $(974) million | Improved by $1.263 billion |
| Diluted EPS | $1.18 | $(4.01) | Improved by $5.19 |
| Diluted EPS from continuing operations | $2.10 | $2.13 | Down $0.03 |
| Operating cash flow from continuing operations | $1.636 billion | $1.404 billion | Up $232 million |
| Capital expenditures | $1.379 billion | $1.063 billion | Up $316 million |
| Long-term debt, excluding current maturities | $5.504 billion | $5.802 billion | Down $298 million |
Consolidated operating margin was approximately 20.3% in 2013, compared with approximately 20.6% in 2012. Continuing-operations income attributable to Ameren was $512 million, or $2.10 diluted EPS. Ameren paid $388 million of common dividends, or $1.60 per share.
At December 31, 2013, Ameren had $30 million of consolidated cash, $368 million of commercial paper outstanding, and approximately $1.7 billion of available liquidity under cash and committed credit facilities. Its credit agreements provide $2.1 billion of aggregate capacity through November 2017, subject to applicable limits and outstanding obligations.
Ameren’s consolidated balance sheet included total assets of $21.042 billion, total equity of $6.686 billion, and current maturities of long-term debt of $534 million. Consolidated long-term debt and capital lease obligations, including current maturities, totaled approximately $6.048 billion.
Material changes versus prior comparable period
- Continuing-operations earnings declined modestly despite higher electric and gas margins. Ameren Missouri earnings fell $21 million, while Ameren Illinois earnings increased $19 million.
- Electric margins increased $122 million, or 4%, and natural-gas margins increased $28 million, or 6%. Rate increases, formula-ratemaking adjustments, and transmission investments were partly offset by weather, the Callaway outage, regulatory charges, and lower demand.
- Ameren Missouri’s 2013 Callaway nuclear refueling and maintenance outage increased costs; no comparable outage occurred in 2012. Another outage was scheduled for fall 2014.
- Ameren Missouri recorded a $26 million pretax charge related to a Missouri Public Service Commission fuel-adjustment-clause prudence review and estimated customer refunds.
- Ameren Illinois recorded a $15 million pretax charge after the Illinois Commerce Commission disallowed recovery of part of debt-premium costs from a 2012 debt tender offer.
- Operating cash flow from continuing operations increased to $1.636 billion, but capital expenditures rose to $1.379 billion, primarily because of transmission, reliability, storm-restoration, and infrastructure-modernization projects.
- Ameren reported a $223 million loss from discontinued operations in 2013, including a $201 million pretax loss on the New AER divestiture. The 2012 discontinued-operations loss was $1.496 billion, largely reflecting $2.6 billion of merchant-generation impairment charges.
- The divestiture reduced Ameren’s exposure to merchant generation but did not produce cash proceeds. Ameren retained certain pension obligations, abandoned Meredosia and Hutsonville, and continued to provide specified credit support for New AER.
Guidance, outlook, risks, contingencies, and unusual items
- Ameren expects cumulative capital spending of approximately $8.1 billion to $8.7 billion from 2014 through 2018, including up to $3.5 billion at Ameren Missouri, up to $3.66 billion at Ameren Illinois, and up to $1.44 billion at ATXI.
- Ameren Missouri expected to file an electric rate case in July 2014, including recovery of Callaway reactor-head replacement and Labadie precipitator-upgrade costs.
- Ameren Illinois’ 2014 electric delivery rates included a net $45 million reduction, primarily due to a $68 million customer refund, while its 2014 natural-gas rate order authorized a $32 million annual revenue increase.
- Ameren expects cash used for capital expenditures and dividends to exceed operating cash flow over the next several years, requiring debt, equity, or other financing.
- Ameren expected to refinance $425 million of parent-company debt and $104 million of Ameren Missouri debt maturing in May 2014.
- Major risks include regulatory lag, rate disallowances, appeals of Illinois rate orders, possible reductions in FERC transmission returns, customer complaints seeking lower Ameren Missouri returns, and performance requirements under Illinois formula ratemaking.
- Environmental compliance remains material. Ameren estimated $275 million to $350 million of environmental capital expenditures over five years for existing regulations, excluding uncertain future cooling-water, wastewater, greenhouse-gas, and coal-combustion-residual requirements.
- The EPA’s Rush Island Clean Air Act litigation could require substantial capital expenditures, operating costs, or penalties; trial was scheduled for January 2015, and the filing does not provide a clear ultimate loss value.
- Ameren Missouri’s remaining Taum Sauk insurance claims totaled $68 million at year-end. Recovery is subject to pending litigation and is not assured.
- Ameren had $190 million of guarantees and $11 million of letters of credit supporting New AER. The company could be required to provide additional credit support, while indemnification depends partly on below-investment-grade counterparties.
- Ameren Illinois had a $65 million regulatory asset for its 2013 formula-ratemaking reconciliation and a $65 million regulatory liability for the 2012 reconciliation, subject to future collection and refunds.
- Pension and postretirement unfunded obligations declined to $461 million from $1.143 billion, largely because of higher discount rates and favorable asset returns. Ameren estimated aggregate pension contributions of $270 million over the next five years.
- Management stated that disclosure controls and internal control over financial reporting were effective at December 31, 2013. PricewaterhouseCoopers issued unqualified audit opinions.
Most important facts for investors to verify
- Whether the New AER divestiture’s final working-capital adjustment, tax treatment, contingent liabilities, and indemnification arrangements change the recorded $223 million discontinued-operations loss.
- The refinancing and repayment of the $425 million Ameren parent maturity and $104 million Ameren Missouri maturity due in May 2014.
- The outcome of Ameren Illinois’ appeals of its electric and natural-gas rate orders and the effect on allowed returns, rate recovery, and cash flow.
- The outcome of the FERC complaint seeking lower transmission returns and potential refunds for Ameren Illinois and ATXI.
- The resolution and financial exposure from the Rush Island environmental litigation, Taum Sauk insurance claims, MGP remediation, asbestos claims, and municipal-tax proceedings.
- Execution, cost, and regulatory recovery of the projected $8.1 billion to $8.7 billion capital program, especially the Illinois Rivers transmission project.
- Ameren Missouri’s fall 2014 Callaway outage, fuel availability, environmental compliance costs, and potential disallowance of the $69 million capitalized nuclear-development investment.
- Liquidity after dividends, capital expenditures, debt maturities, commercial-paper borrowings, and any additional collateral or credit-support requirements.
- Whether regulatory assets totaling $1.240 billion and regulatory liabilities totaling $1.705 billion remain probable of recovery or refund through future customer rates.