Ameren Corp. Reports Operating Results (10-Q)
Ameren Corp. has a market cap of $7.14 billion; its shares were traded at around $29.83 with a P/E ratio of 10.29 and P/S ratio of 1.01. The dividend yield of Ameren Corp. stocks is 5.16%. Ameren Corp. had an annual average earning growth of 1.6% over the past 5 years.AEE is in the portfolios of David Dreman of Dreman Value Management, John Hussman of Hussman Economtrics Advisors, Inc., Paul Tudor Jones of The Tudor Group, Mario Gabelli of GAMCO Investors, Jeremy Grantham of GMO LLC.
Highlight of Business Operations: Ameren reported a net loss of $167 million for the third quarter of 2010 compared with net income of $227 million in the third quarter of 2009. Ameren also reported net income of $87 million for the nine months ended September 30, 2010, compared with net income of $533 million for the nine months ended September 30, 2009. Noncash goodwill and other asset impairment charges related to Amerens Merchant Generation business reduced net income by $522 million in the third quarter and first nine months of 2010. These charges reflected a decline in the value of this business, principally as a result of sustained lower power prices and the potential enactment of more stringent environmental regulations. These charges included all of the goodwill formerly assigned to Amerens and Gencos Merchant Generation segments and included a reduction in the carrying amounts of certain of Amerens and Gencos merchant generating assets and Amerens, Gencos and AERGs SO2 emissions allowance inventory. The goodwill and other asset impairment charges did not result in a violation of any Ameren or Ameren subsidiary debt covenants or counterparty agreements. Amerens earnings were also lower in the third quarter and the first nine months of 2010 compared with the same prior-year periods because of reduced Merchant Generation margins, as a result of lower realized power prices and higher fuel and related transportation costs, and an increase in nonfuel operations and maintenance expenses, primarily reflecting the absence, in the third quarter of 2010, of a benefit from anticipated recovery of previously expensed bad debt expense that was recognized in the third quarter of 2009. Mitigating the impact of these factors in the third quarter and first nine months of 2010 were higher electricity sales, which benefited from warmer summer weather, new utility rates in Missouri and Illinois, and for FERC electric transmission, and lower financing costs, which reflected increased capitalization of construction financing costs and improved cash flow.
Ameren has regulatory proceedings that are pending in its various jurisdictions. UE filed an electric rate case in September 2010 requesting a $263 million, or 11%, annual revenue increase. The request is primarily driven by the need to recover investments made to improve infrastructure reliability, comply with environmental regulations, and recover higher net fuel costs. By the time new rates from this case go into effect, more than $1 billion of new energy infrastructure will be in operation and serving customers, as compared to UEs last rate case. This includes investments related to the scrubber project at the Sioux power plant. A decision from the MoPSC is required by the end of August 2011. In June 2010, UE also requested a $12 million, or 7%, annual increase in natural gas delivery rates. A MoPSC decision on that request is required by the end of May 2011.
CIPS, CILCO and IP significantly reduced planned spending levels to align such spending with the revenues and related cash flows resulting from the ICCs May 2010 amended rate order. The ICC agreed to rehear three issues associated with their May 2010 rate order raised by CIPS, CILCO and IP and one issue raised by intervenors. On November 4, 2010, the ICC approved an order on the rehearing issues, which authorized an increase in annual revenues of $25 million, in addition to the $15 million authorized in the ICCs May 2010 amended rate order. The November 2010 ICC rehearing order included a $4 million rate design revenue reduction, which was requested by intervenors. The overall annual delivery service revenue increase as a result of these orders is $40 million. The rate changes relating to the rehearing issues addressed in the November 2010 ICC order will become effective in mid-November 2010. The ICCs May 2010 rate order also provided for recovery of an additional estimated $13 million annually of electric and gas supply-related costs via riders. AIC is currently reviewing the ICCs November 2010 rehearing rate order and its impact on prospective capital and operating expenditures.
Ameren Corporation incurred a net loss of $167 million, or 70 cents per share, in the third quarter of 2010, compared to net income of $227 million, or $1.04 per share, in the third quarter of 2009. The net loss attributable to Ameren Corporation in the third quarter of 2010 was caused by a net loss in the Merchant Generation segment of $470 million compared with net income in the Merchant Generation segment of $37 million in the prior-year period. That loss was reduced by improved results from the Ameren Missouri and Ameren Illinois segments, whose net income attributable to Ameren Corporation increased by $82 million and $30 million, respectively, from the same period in 2009.
Net income attributable to Ameren Corporation decreased to $87 million, or 37 cents per share, in the first nine months of 2010 from $533 million, or $2.48 per share, in the first nine months of 2009. The decrease in net income attributable to Ameren Corporation was caused by a net loss in the Merchant Generation segment of $428 million in the first nine months of 2010 compared with net income in the Merchant Generation segment of $205 million in the prior-year period. Net income attributable to Ameren Corporation in the Ameren Missouri and Ameren Illinois segments increased by $119 million and $69 million, respectively, from the same period in 2009.
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