DERIVATIVE FINANCIAL INSTRUMENTS

We use derivatives principally to manage the risk of changes in market prices for natural gas, diesel, power, and uranium. Such price fluctuations may cause the following:


•	an unrealized appreciation or depreciation of our contracted commitments to purchase or sell when purchase or sale prices under the commitments are compared with current commodity prices;


•	market values of natural gas and uranium inventories that differ from the cost of those commodities in inventory; and


•	actual cash outlays for the purchase of these commodities that differ from anticipated cash outlays.

The derivatives that we use to hedge these risks are governed by our risk management policies for forward contracts, futures, options, and swaps. Our net positions are continually assessed within our structured hedging programs to determine whether new or offsetting transactions are required. The goal of the hedging program is generally to mitigate financial risks while ensuring that sufficient volumes are available to meet our requirements. Contracts we enter into as part of our risk management program may be settled financially, settled by physical delivery, or net settled with the counterparty.

The following table presents open gross commodity contract volumes by commodity type for derivative assets and liabilities as of December 31, 2013, and 2012. As of December 31, 2013, these contracts ran through October 2016, October 2019, May 2032, and October 2016 for fuel oils, natural gas, power, and uranium, respectively.



	Quantity (in millions, except as indicated)
	2013			2012
Commodity	Ameren Missouri	Ameren Illinois	Ameren	Ameren Missouri	Ameren Illinois	Ameren
Fuel oils (in gallons)^(a)	66	(b)	66	70	(b)	70
Natural gas (in mmbtu)	28	108	136	19	128	147
Power (in megawatthours)	3	11	14	11	14	25
Uranium (pounds in thousands)	796	(b)	796	446	(b)	446


(a)	Fuel oils consist of heating oil, ultra-low-sulfur diesel, and crude oil.


(b)	Not applicable.

Authoritative accounting guidance regarding derivative instruments requires that all contracts considered to be derivative instruments be recorded on the balance sheet at their fair values, unless the NPNS exception applies. See Note 8 – Fair Value Measurements for discussion of our methods of assessing the fair value of derivative instruments. Many of our physical contracts, such as our purchased power contracts, qualify for the NPNS exception to derivative accounting rules. The revenue or expense on NPNS contracts is recognized at the contract price upon physical delivery.

If we determine that a contract meets the definition of a derivative and is not eligible for the NPNS exception, we review the contract to determine if it qualifies for hedge accounting. We also consider whether gains or losses resulting from such derivatives qualify for regulatory deferral. Derivative contracts that qualify for regulatory deferral are recorded at fair value, with changes in fair value recorded as regulatory assets or regulatory liabilities in the period in which the change occurs. Ameren Missouri and Ameren Illinois believe derivative gains and losses deferred as regulatory assets and regulatory liabilities are probable of recovery or refund through future rates charged to customers. Regulatory assets and regulatory liabilities are amortized to operating income as related losses and gains are reflected in rates charged to customers. Therefore, gains and losses on these derivatives have no effect on operating income. As of December 31, 2013, and 2012, all contracts that qualify for hedge accounting receive regulatory deferral.

Authoritative accounting guidance permits companies to offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a liability) against fair value amounts recognized for derivative instruments that are executed with the same counterparty under the same master netting arrangement. The Ameren Companies did not elect to adopt this guidance for any eligible commodity contracts.

The following table presents the carrying value and balance sheet location of all derivative instruments as of December 31, 2013, and 2012:



	Balance Sheet Location		Ameren Missouri		Ameren Illinois		Ameren
2013
Derivative assets not designated as hedging instruments^(a)
Commodity contracts:
Fuel oils	Other current assets	$	6	$	—	$	6
	Other assets		3		—		3
Natural gas	Other current assets		1		1		2
Power	Other current assets		23		—		23
	Total assets	$	33	$	1	$	34
Derivative liabilities not designated as hedging instruments^(a)
Commodity contracts:
Fuel oils	MTM derivative liabilities	$	(b)	$	—	$	2
	Other current liabilities		2		—		—
	Other deferred credits and liabilities		1		—		1
Natural gas	MTM derivative liabilities		(b)		27		32
	Other current liabilities		5		—		—
	Other deferred credits and liabilities		6		19		25
Power	MTM derivative liabilities		(b)		9		13
	Other current liabilities		4		—		—
	Other deferred credits and liabilities		—		99		99
Uranium	MTM derivative liabilities		(b)		—		5
	Other current liabilities		5		—		—
	Other deferred credits and liabilities		1		—		1
	Total liabilities	$	24	$	154	$	178
2012
Derivative assets not designated as hedging instruments^(a)
Commodity contracts:
Fuel oils	Other current assets	$	8	$	—	$	8
	Other assets		4		—		4
Natural gas	Other current assets		—		1		1
	Other assets		1		—		1
Power	Other current assets		14		—		14
	Other assets		1		—		1
	Total assets	$	28	$	1	$	29
Derivative liabilities not designated as hedging instruments^(a)
Commodity contracts:
Fuel oils	MTM derivative liabilities	$	(b)	$	—	$	2
	Other current liabilities		2		—		—
	Other deferred credits and liabilities		2		—		2
Natural gas	MTM derivative liabilities		(b)		56		64
	Other current liabilities		8		—		—
	Other deferred credits and liabilities		7		38		45
Power	MTM derivative liabilities		(b)		21		25
	Other current liabilities		4		—		—
	Other deferred credits and liabilities		—		90		90
Uranium	MTM derivative liabilities		(b)		—		1
	Other current liabilities		1		—		—
	Other deferred credits and liabilities		1		—		1
	Total liabilities	$	25	$	205	$	230


(a)	Includes derivatives subject to regulatory deferral.


(b)	Balance sheet line item not applicable to registrant.

The following table presents the cumulative amount of pretax net gains (losses) on all derivative instruments deferred in regulatory assets or regulatory liabilities as of December 31, 2013, and 2012:



		Ameren Missouri			Ameren Illinois			Ameren
2013
Cumulative gains (losses) deferred in regulatory liabilities or assets:
Fuel oils derivative contracts^(a)	$	2		$	—		$	2
Natural gas derivative contracts^(b)		(10	)		(45	)		(55	)
Power derivative contracts^(c)		19			(108	)		(89	)
Uranium derivative contracts^(d)		(6	)		—			(6	)
2012
Cumulative gains (losses) deferred in regulatory liabilities or assets:
Fuel oils derivative contracts^(a)	$	4		$	—		$	4
Natural gas derivative contracts^(b)		(14	)		(93	)		(107	)
Power derivative contracts^(c)		12			(111	)		(99	)
Uranium derivative contracts^(d)		(2	)		—			(2	)

(a)

Represents net gains on fuel oils derivative contracts at Ameren Missouri. These contracts are a partial hedge of Ameren Missouri’s transportation costs for coal through October 2016, as of December 31, 2013. Current gains deferred as regulatory liabilities include $3 million and $3 million at Ameren and Ameren Missouri as of December 31, 2013, respectively. Current losses deferred as regulatory assets include $1 million and $1 million at Ameren and Ameren Missouri as of December 31, 2013, respectively.

(b)

Represents net losses associated with natural gas derivative contracts. These contracts are a partial hedge of natural gas requirements through October 2019 at Ameren and Ameren Missouri and through March 2017 at Ameren Illinois, in each case as of December 31, 2013. Current gains deferred as regulatory liabilities include $2 million, $1 million, and $1 million at Ameren, Ameren Missouri, and Ameren Illinois, respectively, as of December 31, 2013. Current losses deferred as regulatory assets include $32 million, $5 million, and $27 million at Ameren, Ameren Missouri and Ameren Illinois, respectively, as of December 31, 2013.

(c)

Represents net gains (losses) associated with power derivative contracts. These contracts are a partial hedge of power price requirements through May 2032 at Ameren and Ameren Illinois and through December 2015 at Ameren Missouri, in each case as of December 31, 2013. Current gains deferred as regulatory liabilities include $23 million and $23 million at Ameren and Ameren Missouri, respectively, as of December 31, 2013. Current losses deferred as regulatory assets include $13 million, $4 million, and $9 million at Ameren, Ameren Missouri and Ameren Illinois, respectively, as of December 31, 2013.


(d)	Represents net losses on uranium derivative contracts at Ameren Missouri. These contracts are a partial hedge of Ameren Missouri's uranium requirements through October 2016, as of December 31, 2013. Current losses deferred as regulatory assets include $5 million and $5 million at Ameren and Ameren Missouri as of December 31, 2013, respectively.

Derivative instruments are subject to various credit-related losses in the event of nonperformance by counterparties to the transaction. Exchange-traded contracts are supported by the financial and credit quality of the clearing members of the respective exchanges and have nominal credit risk. In all other transactions, we are exposed to credit risk. Our credit risk management program involves establishing credit limits and collateral requirements for counterparties, using master trading and netting agreements, and reporting daily exposure to senior management.

We believe that entering into master trading and netting agreements mitigates the level of financial loss that could result from default by allowing net settlement of derivative assets and liabilities. We generally enter into the following master trading and netting agreements: (1) the International Swaps and Derivatives Association Agreement, a standardized financial natural gas and electric contract; (2) the Master Power Purchase and Sale Agreement, created by the Edison Electric Institute and the National Energy Marketers Association, a standardized contract for the purchase and sale of wholesale power; and (3) the North American Energy Standards Board Inc. agreement, a standardized contract for the purchase and sale of natural gas. These master trading and netting agreements allow the counterparties to net settle sale and purchase transactions. Further, collateral requirements are calculated at the master trading and netting agreement level by counterparty.

Although Ameren had not previously elected to offset fair value amounts and collateral for derivative instruments executed with the same counterparty under the same master netting arrangement, authoritative accounting guidance, effective in the first quarter 2013, requires those amounts eligible to be offset to be presented both at the gross and net amounts. The following table provides the recognized gross derivative balances and the net amounts of those derivatives subject to an enforceable master netting arrangement or similar agreement as of December 31, 2013, and 2012:



				Gross Amounts Not Offset in the Balance Sheet
		Gross Amounts Recognized in the Balance Sheet		Derivative Instruments		Cash Collateral Received/Posted^(a)		Net Amount
2013
Commodity contracts eligible to be offset:
Assets:
Ameren Missouri	$	33	$	9	$	—	$	24
Ameren Illinois		1		1		—		—
Ameren	$	34	$	10	$	—	$	24
Liabilities:
Ameren Missouri	$	24	$	9	$	9	$	6
Ameren Illinois		154		1		15		138
Ameren	$	178	$	10	$	24	$	144
2012
Commodity contracts eligible to be offset:
Assets:
Ameren Missouri	$	28	$	9	$	—	$	19
Ameren Illinois		1		1		—		—
Ameren	$	29	$	10	$	—	$	19
Liabilities:
Ameren Missouri	$	25	$	9	$	7	$	9
Ameren Illinois		205		1		58		146
Ameren	$	230	$	10	$	65	$	155


(a)	Cash collateral received reduces gross asset balances and is included in “Other current liabilities” and “Other deferred credits and liabilities” on the balance sheet. Cash collateral posted reduces gross liability balances and is included in “Other current assets” and “Other assets” on the balance sheet.

Concentrations of Credit Risk

In determining our concentrations of credit risk related to derivative instruments, we review our individual counterparties and categorize each counterparty into groupings according to the primary business in which each engages. We calculate maximum exposures based on the gross fair value of financial instruments, including accrual and NPNS contracts. As of December 31, 2013, if counterparty groups were to fail completely to perform on contracts, Ameren, Ameren Missouri, and Ameren Illinois' maximum exposure was $13 million, $12 million, and $1 million, respectively. As of December 31, 2012, if counterparty groups were to fail completely to perform on contracts, Ameren, Ameren Missouri, and Ameren Illinois' maximum exposure was $23 million, $22 million, and $1 million, respectively. The potential loss on counterparty exposures is reduced by the application of master trading and netting agreements and collateral held to the extent of reducing the exposure to zero. As of December 31, 2013, the potential loss after consideration of the application of master trading and netting agreements and collateral held for Ameren and Ameren Missouri was $6 million and $6 million, respectively. As of December 31, 2012, the potential loss after consideration of the application of master trading and netting agreements and collateral held for Ameren and Ameren Missouri was $15 million and $15 million, respectively.

Derivative Instruments with Credit Risk-Related Contingent Features

Our commodity contracts contain collateral provisions tied to the Ameren Companies’ credit ratings. If we were to experience an adverse change in our credit ratings, or if a counterparty with reasonable grounds for uncertainty regarding performance of an obligation requested adequate assurance of performance, additional collateral postings might be required. The following table presents, as of December 31, 2013, and 2012, the aggregate fair value of all derivative instruments with credit risk-related contingent features in a gross liability position, the cash collateral posted, and the aggregate amount of additional collateral that could be required to be posted with counterparties. The additional collateral required is the net liability position allowed under the master trading and netting agreements assuming (1) the credit risk-related contingent features underlying these agreements were triggered on December 31, 2013, or 2012, respectively, and (2) those counterparties with rights to do so requested collateral:



	Aggregate Fair Value of Derivative Liabilities^(a)		Cash Collateral Posted		Potential Aggregate Amount of Additional Collateral Required^(b)
2013
Ameren Missouri	$	70	$	2	$	67
Ameren Illinois	75		15		55
Ameren	$	145	$	17	$	122
2012
Ameren Missouri	$	78	$	3	$	71
Ameren Illinois	148		58		84
Ameren	$	226	$	61	$	155


(a)	Prior to consideration of master trading and netting agreements and including NPNS and accrual contract exposures.


(b)	As collateral requirements with certain counterparties are based on master trading and netting agreements, the aggregate amount of additional collateral required to be posted is determined after consideration of the effects of such agreements.

Derivatives Subject to Regulatory Deferral

The following table represents the net change in market value associated with derivatives that qualify for regulatory deferral for the years ended December 31, 2013 and 2012:



		Gain (Loss) Recognized in Regulatory Liabilities or Regulatory Assets
		2013			2012
Ameren ^(a)	Fuel oils	$	(2	)	$	(15	)
	Natural gas	52			84
	Power	10			(180		)
	Uranium	(4		)	(1		)
	Total	$	56		$	(112	)
Ameren Missouri	Fuel oils	$	(2	)	$	(15	)
	Natural gas	4			10
	Power	7			(9		)
	Uranium	(4		)	(1		)
	Total	$	5		$	(15	)
Ameren Illinois	Natural gas	$	48		$	74
	Power	3			29
	Total	$	51		$	103


(a)	Amounts include intercompany eliminations.