-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GBz6SsStA74cROliA3zcOdvC4UeAW4Oo3GjGw488/Kp1CLP2xd+KyLqDslAiuZW5 0f/B9ZVhb8FRMnlUcz+KEA== /in/edgar/work/0000950124-00-006985/0000950124-00-006985.txt : 20001116 0000950124-00-006985.hdr.sgml : 20001116 ACCESSION NUMBER: 0000950124-00-006985 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL ILLINOIS PUBLIC SERVICE CO CENTRAL INDEX KEY: 0000018654 STANDARD INDUSTRIAL CLASSIFICATION: [4931 ] IRS NUMBER: 370211380 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03672 FILM NUMBER: 769278 BUSINESS ADDRESS: STREET 1: 607 E ADAMS ST CITY: SPRINGFIELD STATE: IL ZIP: 62739 BUSINESS PHONE: 2175233600 MAIL ADDRESS: STREET 1: CENTRAL ILLINOIS PUBLIC SERVICE CO STREET 2: 607 E ADAMS ST CITY: SPRINGFIELD STATE: IL ZIP: 62739 10-Q 1 0001.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended September 30, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Transition Period From to Commission file number 1-3672. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY (Exact name of registrant as specified in its charter) Illinois 37-0211380 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 607 East Adams Street, Springfield, Illinois 62739 (Address of principal executive offices and Zip Code) Registrant's telephone number, including area code: (217) 523-3600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . ------- ------ Shares outstanding of each of registrant's classes of common stock as of October 31, 2000: Common Stock, no par value, held by Ameren Corporation (parent company of Registrant) - 25,452,373 Central Illinois Public Service Company Index Page No. Part I Financial Information (Unaudited) Management's Discussion and Analysis 2 Quantitative and Qualitative Disclosures About Market Risk 6 Balance Sheet - September 30, 2000 and December 31, 1999 8 Statement of Income - Three months, nine months and 12 months ended September 30, 2000 and 1999 9 Statement of Cash Flows - Nine months ended September 30, 2000 and 1999 10 Notes to Financial Statements 11 Part II Other Information 14 PART I. FINANCIAL INFORMATION (UNAUDITED) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Central Illinois Public Service Company (AmerenCIPS or the Registrant) is a subsidiary of Ameren Corporation (Ameren), a holding company registered under the Public Utility Holding Company Act of 1935 (PUHCA). In December 1997, Union Electric Company (AmerenUE) and CIPSCO Incorporated (CIPSCO) combined to form Ameren, with AmerenUE and CIPSCO's subsidiaries, the Registrant and CIPSCO Investment Company (CIC), becoming subsidiaries of Ameren (the Merger). On May 1, 2000, following the receipt of all required State and Federal regulatory approvals, the Registrant transferred its electric generating assets and liabilities, at historical net book value, to a newly created nonregulated company, AmerenEnergy Generating Company (Generating Company), a subsidiary of AmerenEnergy Resources Company (Resources Company), a wholly-owned subsidiary of Ameren (the Transfer). Discussion below under Results of Operations reflects that as a result of the Transfer, from May 1, 2000 interchange sales and sales under certain wholesale contracts are no longer being included in the Registrant's operating revenues and that operating expenses include those expenses it incurs under its traditional transmission and distribution operations, as well as purchased power under an electric power supply agreement with Resources Company's newly created marketing subsidiary (the Power Supply Agreement). See Electric Industry Restructuring and Note 1 under Notes to Financial Statements for further discussion. The following discussion and analysis should be read in conjunction with the Notes to Financial Statements beginning on page 11, and the Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A), the Audited Financial Statements and the Notes to Financial Statements appearing in the Registrant's 1999 Form 10-K. RESULTS OF OPERATIONS Earnings Third quarter 2000 earnings of $31 million decreased $12 million from 1999's third quarter earnings. Earnings for the nine months ended September 30, 2000 were comparable to the preceding nine-month period. Earnings for the 12 months ended September 30, 2000 were $50 million, a $34 million decrease from the preceding 12-month period. Earnings fluctuated due to many conditions, primarily: sales growth, weather variations, electric rate reductions, the Transfer, a gas rate increase, competitive market forces, fluctuating operating costs, changes in interest expense, changes in income and property taxes and nonrecurring charges for a targeted employee separation plan and for coal contract termination payments. The significant items affecting revenues, costs and earnings during the three-month, nine-month and 12-month periods ended September 30, 2000 and 1999 are detailed below. Electric Operations Electric Operating Revenues Variations for periods ended September 30, 2000 from comparable prior-year periods - ------------------------------------------------------------------------------- (Millions of Dollars) Three Months Nine Months Twelve Months ------------ ----------- ------------- - ------------------------------------------------------------------------------- Credit to customers $ 8 $ 8 $ 16 Effect of abnormal weather (14) (17) (18) Growth and other - 20 22 Interchange sales (58) (59) (42) - ------------------------------------------------------------------------------- $ (64) $ (48) $ (22) - ------------------------------------------------------------------------------- Electric revenues for the three months ended September 30, 2000, decreased $64 million compared to the prior three-month period primarily due to a decrease in interchange sales, which are now being recorded at Resources Company as a result of the Transfer. In addition, sales under certain wholesale contracts are no longer being included in the Registrant's operating revenues as a result of the Transfer. Electric revenues were also reduced by a decline in residential and commercial sales of 8 percent and 4 percent, respectively, resulting from -2- milder weather. These decreases were partially offset by a 37 percent increase in industrial sales, resulting primarily from a new contract with a large industrial customer. Electric revenues for the nine months and 12 months ended September 30, 2000, decreased $48 million and $22 million, respectively, compared to the same prior year periods primarily due to a decrease in interchange sales as a result of the Transfer. Electric revenues were also reduced by a decrease in residential sales of 4 percent and 3 percent, respectively, resulting from milder weather. These decreases were offset in part by an increase in wholesale and industrial sales. Fuel and Purchased Power Variations for periods ended September 30, 2000 from comparable prior-year periods - -------------------------------------------------------------------------------- (Millions of Dollars) Three Months Nine Months Twelve Months ------------ ----------- ------------- - -------------------------------------------------------------------------------- Fuel: Generation $ (51) $ (70) $ (61) Price - (6) (8) Generation efficiencies and other - (4) (7) Coal contract termination payments - - 52 Purchased power 73 140 143 - -------------------------------------------------------------------------------- $ 22 $ 60 $ 119 - -------------------------------------------------------------------------------- Fuel and purchased power costs for the three months ended September 30, 2000 increased $22 million versus the same period in the prior year, primarily due to an overall net increase in purchased power costs under the provisions of the Power Supply Agreement entered into as part of the Transfer. Fuel and purchased power costs for the nine months ended September 30, 2000 increased $60 million compared to the prior year period, primarily due to an overall net increase in generation and purchased power resulting from higher native sales and higher purchased power costs under the provisions of the Power Supply Agreement entered into as part of the Transfer, partially offset by lower fuel prices. The $119 million increase in fuel and purchased power costs for the 12 months ended September 30, 2000 versus the prior-year period was primarily the result of an overall net increase in generation and purchased power, resulting from higher sales volume and higher purchased power costs under the provisions of the Power Supply Agreement entered into as part of the Transfer, and coal contract termination payments, partially offset by lower fuel prices. Gas Operations Gas revenues for the three-month and nine-month periods ended September 30, 2000, increased $4 million and $8 million, respectively, compared to the year-ago periods primarily due to higher gas costs recovered through the Registrant's purchased gas adjustment clause, partially offset by decreased retail sales of 2 percent and 5 percent, respectively. Gas revenues for the 12-month period ended September 30, 2000 increased $16 million compared to the same year-ago period primarily due to a gas rate increase which became effective in February 1999 and higher gas costs recovered through the Registrant's purchased gas adjustment clause. These increases were partially offset by a 6 percent decline in retail sales, as well as a decrease in off-system sales to others. Gas costs for the three-month, nine-month and 12-month periods ended September 30, 2000, increased $3 million, $4 million and $11 million, respectively, compared to the year-ago periods primarily due to higher gas prices, partially offset by lower retail sales. Other Operating Expenses Other operating expense variations reflected recurring factors such as growth, inflation, the Transfer and labor and benefit decreases, in addition to a charge for the targeted employee separation plan. Other operations expenses decreased $28 million and $43 million for the three months and nine months ended September 30, 2000, respectively, compared to the same year-ago periods primarily due to lower employee benefit costs and a reduced workforce resulting from the Transfer. Other operations expenses decreased $39 million for the 12 months ended September 30, 2000, compared to the same year-ago period, primarily due to a reduced workforce resulting from the Transfer, coupled with the fact that expenses for the twelve months ended September 30, 1999 included a nonrecurring pretax charge for a targeted separation plan of $7 million. These decreases were partially offset by expenses associated with deregulation in Illinois and the Year 2000 computer compliance project. -3- Maintenance expenses for the three months, nine months and 12 months ended September 30, 2000 decreased $17 million, $32 million and $17 million, respectively, from the comparable year-ago periods. These decreases were primarily the result of decreased power plant maintenance resulting from the Transfer. Taxes Income taxes for the three months and 12 months ended September 30, 2000, decreased $5 million and $14 million, respectively, primarily due to lower pretax income. Income taxes for the nine months ended September 30, 2000, increased $4 million, primarily due to a higher effective tax rate. Other taxes for the three months ended September 30, 2000 decreased $4 million primarily due to lower property taxes as a result of the Transfer. Other taxes for the 12 months ended September 30, 2000 decreased $3 million primarily due to lower property taxes as a result of the Transfer and a decrease in gross receipt taxes, resulting from the restructuring of the Illinois public utility tax whereby gross receipt taxes are no longer recorded as electric revenue and gross receipt tax expense. These decreases were partially offset by increased property taxes as a result of higher estimated assessment values. Other Income and Deductions For the three months, nine months and 12 months ended September 30, 2000, miscellaneous, net increased $10 million, $16 million and $17 million, respectively, compared to same year-ago periods, primarily due to interest income earned on the promissory note receivable from Generating Company as part of the Transfer. See Electric Industry Restructuring and Note 1 under Notes to Financial Statements for further discussion of the promissory note. Balance Sheet The $5 million increase in trade accounts receivable and unbilled revenue was primarily due to higher revenues in August and September 2000 compared to November and December 1999. The decrease in property and plant, net and the increase in intercompany notes receivable and intercompany tax receivable were due to the Transfer. See Electric Industry Restructuring and Note 1 under Notes to Financial Statements for further discussion. Changes in accounts and wages payable, taxes accrued, other accounts and notes receivable, and other current assets resulted from the timing of various payments to taxing authorities and suppliers. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities totaled $139 million for the nine months ended September 30, 2000, compared to $163 million during the same 1999 period. Cash flows used in investing activities totaled $31 million and $81 million for the nine months ended September 30, 2000 and 1999, respectively. Construction expenditures for the nine months ended September 30, 2000, for constructing new or improving existing facilities, were $31 million. Construction expenditures decreased from the prior period due to the effects of the Transfer. See Electric Industry Restructuring and Note 1 under Notes to Financial Statements for further discussion. Cash flows used in financing activities totaled $100 million for the nine months ended September 30, 2000, compared to $72 million during the same 1999 period. The Registrant's principal financing activities for the period included the redemption of long-term debt, the payment of intercompany notes payable and the payment of dividends, partially offset by the issuance of long-term debt. Subject to certain approvals, the Registrant intends to transfer primary liability for $104 million of tax-exempt pollution control loan obligations to Generating Company during the first quarter of 2001. Upon the transfer of these obligations to Generating Company, the amount of Generating Company's liability to the Registrant under the promissory note issued as part of the Transfer will be reduced by a like amount. The pollution control loan obligations referred to above have maturity dates ranging from 2014 to 2028 and bear interest at variable rates. The Registrant plans to continue utilizing short-term debt to support normal operations and other temporary requirements. The Registrant is authorized by the Securities and Exchange Commission (SEC) under PUHCA to have up to $250 million of short-term unsecured debt instruments outstanding at any one time. Short-term borrowings consist of bank loans (maturities generally on an overnight basis) and commercial paper (maturities generally within 1 to 45 days). At September 30, 2000, the Registrant had committed bank lines of credit -4- aggregating $25 million (all of which was unused and available at such date) which make available interim financing at various rates of interest based on LIBOR, the bank certificate of deposit rate or other options. The lines of credit are renewable annually at various dates throughout the year. At September 30, 2000, the Registrant had no outstanding short-term borrowings. Also, the Registrant has the ability to borrow up to approximately $950 million from Ameren or AmerenUE through a regulated money pool agreement. The regulated money pool was established to coordinate and provide for certain short-term cash and working capital requirements and is administered by Ameren Services Company, another subsidiary of Ameren. Interest is calculated at varying rates of interest depending on the composition of internal and external funds in the regulated money pool. At September 30, 2000, the Registrant had $126 million of intercompany borrowings outstanding and $484 million available through the regulated money pool. The Registrant, in the ordinary course of business, explores opportunities to reduce its costs in order to remain competitive in the marketplace. An area where the Registrant focuses its review includes, but is not limited to, labor costs. In the labor area, the Registrant has reached agreements with all of the Registrant's major collective bargaining units which will permit it to manage its labor costs and practices effectively in the future. The Registrant also explores alternatives to effectively manage the size of its workforce. These alternatives include utilizing hiring freezes, outsourcing and offering employee separation packages. Certain of these cost reduction alternatives could require nonrecurring payments of employee separation benefits. Management is unable to predict which (if any), and to what extent, these alternatives to reduce its overall cost structure will be executed. Management is unable to determine the impact of these actions on the Registrant's future financial position, results of operations or liquidity. REGULATORY MATTERS In September 2000, the Registrant and its affiliate, AmerenUE, filed a request with the Illinois Commerce Commission (ICC) seeking authorization to transfer AmerenUE's Illinois-based electric and natural gas busineses and its Illinois-based distribution and transmission assets and personnel to the Registrant. The distribution and transmission assets and related liabilities will be transferred from AmerenUE to the Registrant at historical net book value of approximately $100 million. In connection with this transaction, the Registrant will issue a subordinated intercompany note payable to AmerenUE of approximately $50 million. The balance of the assets will be transferred to the Registrant in the form of a capital contribution. In October 2000, AmerenUE filed a requestwith the Missouri Public Service Commission for approval of the transfer. The transfer is also subject to regulatory filings and approvals of the Federal Energy Regulatory Commission (FERC), the SEC and the ICC. ELECTRIC INDUSTRY RESTRUCTURING In December 1997, the Governor of Illinois signed the Electric Service Customer Choice and Rate Relief Law of 1997 (the Law) providing for electric utility restructuring in Illinois. This legislation introduces competition into the supply of electric energy at retail in Illinois. One of the major provisions of the Law includes the phasing-in through 2002 of retail direct access, which allows customers to choose their electric generation supplier. The phase-in of retail direct access began on October 1, 1999, with large commercial and industrial customers principally comprising the initial group. The customers in this group represent approximately 24 percent of the Registrant's total sales. As of September 30, 2000, the impact of retail direct access on the Registrant's financial condition, results of operations or liquidity was immaterial. Retail direct access will be offered to the remaining commercial and industrial customers on December 31, 2000, and to residential customers on May 1, 2002. The Transfer In conjunction with another provision of the Law, on May 1, 2000, following the receipt of all required State and Federal regulatory approvals, the Registrant transferred its electric generating assets and liabilities, at historical net book value, to a newly created nonregulated company, AmerenEnergy Generating Company (Generating Company), a subsidiary of AmerenEnergy Resources Company, a wholly-owned subsidiary of Ameren, in exchange for a promissory note from Generating Company in the principal amount of $552 million and 1,000 shares of Generating Company common stock. The promissory note has a term of five years and bears interest at 7 percent based on a 10-year amortization. The transferred assets represent a generating capacity of approximately 2,900 megawatts. -5- Approximately 45 percent of the Registrant's employees were transferred to Generating Company as a part of the transaction. Also on May 1, 2000, an electric power supply agreement was entered into between Generating Company and a newly created nonregulated affiliate, AmerenEnergy Marketing Company (Marketing Company), also a wholly-owned subsidiary of Resources Company. On the same date, Marketing Company entered into an electric power supply agreement with the Registrant (Power Supply Agreement) to supply it sufficient power to meet native load requirements. A portion of the capacity and energy supplied by Generating Company to Marketing Company will be resold to the Registrant for resale to native load customers at rates specified by the ICC (which approximate the historical regulatory rates for generation) or to retail customers allowed choice of an electric supplier under state law at market based prices. This agreement expires December 31, 2004. In turn, the Registrant will bill these customers at rates which approximate the costs the Registrant incurs for its capacity and energy supplied by Generating Company. For the five-month period ended September 30, 2000, $157 million of the Registrant's purchased power was derived under the Power Supply Agreement. As a result of the Transfer, coupled with the Power Supply Agreement, prospectively from May 1, 2000 through December 31, 2004, the Registrant's operating revenues will include revenues derived from its traditional transmission and distribution operations, as well as those revenues it receives from its native load customers, or new customers allowed choice of an electric supplier under state law. Sales under certain wholesale contracts and interchange sales will no longer be reflected in operating revenues of the Registrant. Instead, those revenues will be recorded at Resources Company. The Registrant's operating expenses will include those expenses it incurs under its traditional transmission and distribution operations, as well as purchased power expenses incurred under the terms of the Power Supply Agreement. In addition, as a result of the Transfer, the Registrant incurred a deferred intercompany tax gain, which resulted in an additional deferred tax liability. An intercompany tax receivable with Generating Company was established for the deferred tax liability. This asset and liability will be amortized over twenty years. At September 30, 2000, the Registrant's deferred tax liability and intercompany tax receivable was $219 million. MIDWEST ISO On November 9, 2000, the Registrant announced its intention to withdraw from the Midwest Independent System Operator (Midwest ISO) to become a member of the Alliance Regional Transmission Organization (Alliance RTO), pending the necessary regulatory approvals. The Alliance RTO, including its rate structure, is still subject to approval by the FERC. Accordingly, the Registrant is currently unable to determine the impact that the operation of the Alliance RTO, or the withdrawal from the Midwest ISO, will have on its financial condition, results of operations or liquidity. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk represents the risk of changes in value of a financial instrument, derivative or non-derivative, caused by fluctuations in market variables (e.g., interest rates, equity prices, commodity prices, etc.). The following discussion of Ameren's, including AmerenCIPS', risk management activities includes "forward-looking" statements that involve risks and uncertainties. Actual results could differ materially from those projected in the "forward-looking" statements. Ameren handles market risks in accordance with established policies, which may include entering into various derivative transactions. In the normal course of business, Ameren also faces risks that are either non-financial or non-quantifiable. Such risks principally include business, legal, operational and credit risk and are not represented in the following analysis. Interest Rate Risk The Registrant is exposed to market risk through changes in interest rates through its issuance of both long-term and short-term variable-rate debt, commercial paper and auction rate preferred stock. The Registrant manages its interest rate exposure by controlling the amount of these instruments it holds within its total capitalization portfolio and by monitoring the effects of market changes in interest rates. If interest rates increase one percentage point in 2001 as compared to 2000, the Registrant's interest expense would increase by approximately $3 million and net income would decrease by approximately $2 million. This amount has been determined using the assumptions that the Registrant's outstanding variable rate debt, commercial paper and auction market preferred stock as of September 30, 2000, continued to be outstanding throughout 2001, and that the average interest rates for these instruments increased one percentage point over 2000. The model -6- does not consider the effects of the reduced level of overall economic activity that would exist in such an environment. In the event of a significant change in interest rates, management would likely take actions to further mitigate its exposure to this market risk. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no change in the Registrant's financial structure. Commodity Price Risk The Registrant is exposed to changes in market prices for natural gas and fuel and electricity. With regard to its natural gas utility business, the Registrant's exposure to changing market prices is in large part mitigated by the fact that the Registrant has a Purchased Gas Adjustment Clause (PGA) in place. The PGA allows the Registrant to pass on to its customers its prudently incurred costs of natural gas. While the Registrant does not have a provision similar to the PGA for its electric operations, purchased power commodity price risk is mitigated in part due to the fact that the Registrant has entered into a long-term contract with a supplier for purchased power (see Electric Industry Restructuring and Note 1 under Notes to Financial Statements for further discussion). With regard to the Registrant's exposure to commodity price risk for purchased power, Ameren has established a subsidiary, AmerenEnergy, Inc. (AmerenEnergy), whose primary responsibility includes managing market risks associated with the changing market prices for electricity purchased on behalf of the Registrant. ACCOUNTING MATTERS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities and requires recognition of all derivatives as either assets or liabilities on the balance sheet measured at fair value. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," which delayed the effective date of SFAS 133 to all fiscal quarters of all fiscal years, beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities -an amendment of FASB Statement No. 133," which amended certain accounting and reporting standards of SFAS 133. Management believes that adoption of SFAS 133 will not have a material impact on the Registrant's financial position or results of operations upon adoption based on the derivative instruments that existed at June 30, 2000. However, changing market conditions and the volume of future transactions which fall within the scope of SFAS 133, as amended, and the interpretations from the FASB's Derivative Implementation Group could change management's current assessment. As a result, SFAS 133, as amended, could increase the volatility of the Registrant's future earnings and could be material to the Registrant's financial position and results of operations upon adoption. SAFE HARBOR STATEMENT Statements made in this Form 10-Q which are not based on historical facts, are "forward-looking" and, accordingly, involve risks and uncertainties that could cause actual results to differ materially from those discussed. Although such "forward-looking" statements have been made in good faith and are based on reasonable assumptions, there is no assurance that the expected results will be achieved. These statements include (without limitation) statements as to future expectations, beliefs, plans, strategies, objectives, events, conditions, financial performance and the Year 2000 Issue. In connection with the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Registrant is providing this cautionary statement to identify important factors that could cause actual results to differ materially from those anticipated. The following factors, in addition to those discussed elsewhere in this report and in the Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and in subsequent securities filings, could cause results to differ materially from management expectations as suggested by such "forward-looking" statements: the effects of regulatory actions; changes in laws and other governmental actions; the impact on the Registrant of current regulations related to the phasing-in of the opportunity for some customers to choose alternative energy suppliers in Illinois; the effects of increased competition in the future due to, among other things, deregulation of certain aspects of the Registrant's business at both the State and Federal levels; future market prices for fuel and purchased power, electricity, and natural gas, including the use of financial instruments; average rates for electricity in the Midwest; business and economic conditions; interest rates; weather conditions; fuel prices and availability; generation plant performance; the impact of current environmental regulations on utilities and generating companies and the expectation that more stringent requirements will be introduced over time, which could potentially have a negative financial effect; monetary and fiscal policies; future wages and employee benefits costs; and legal and administrative proceedings. -7-
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY BALANCE SHEET UNAUDITED (Thousands of Dollars, Except Shares) September 30, December 31, ASSETS 2000 1999 - ------------------------------------------------------------------------------------------- ---------- ---------- Property and plant, at original cost: Electric $1,192,443 $2,422,002 Gas 272,661 267,909 ---------- ---------- 1,465,104 2,689,911 Less accumulated depreciation and amortization 647,964 1,260,582 ---------- ---------- 817,140 1,429,329 Construction work in progress 5,986 43,435 ---------- ---------- Total property and plant, net 823,126 1,472,764 ---------- ---------- Investments and other assets: Intercompany notes receivable 511,701 -- Intercompany tax receivable 198,931 -- Other 17,628 17,722 ---------- ---------- Total investments and other assets 728,260 17,722 ---------- ---------- Current assets: Cash and cash equivalents 20,994 12,536 Accounts receivable - trade (less allowance for doubtful accounts of $2,408 and $1,828, respectively) 51,630 48,703 Unbilled revenue 77,639 75,884 Other accounts and notes receivable 41,616 20,875 Intercompany notes receivable 39,925 -- Intercompany tax receivable 20,065 -- Materials and supplies, at average cost - Fossil fuel 24,958 47,291 Other 10,075 33,931 Other 6,418 10,387 ---------- ---------- Total current assets 293,320 249,607 ---------- ---------- Regulatory assets: Deferred income taxes 226 21,520 Other 13,742 20,141 ---------- ---------- Total regulatory assets 13,968 41,661 ---------- ---------- Total Assets $1,858,674 $1,781,754 ========== ========== CAPITAL AND LIABILITIES Capitalization: Common stock, no par value, 45,000,000 shares authorized - 25,452,373 shares outstanding $ 120,033 $ 120,033 Retained earnings 434,899 414,345 ---------- ---------- Total common stockholder's equity 554,932 534,378 Preferred stock not subject to mandatory redemption 80,000 80,000 Long-term debt 463,145 493,625 ---------- ---------- Total capitalization 1,098,077 1,108,003 ---------- ---------- Current liabilities: Current maturity of long-term debt 30,000 35,000 Intercompany notes payable 125,720 132,900 Accounts and wages payable 167,050 82,800 Accumulated deferred income taxes 19,627 22,621 Taxes accrued 30,680 32,145 Other 34,003 39,619 ---------- ---------- Total current liabilities 407,080 345,085 ---------- ---------- Accumulated deferred income taxes 279,937 216,661 Accumulated deferred investment tax credits 13,048 32,169 Regulatory liability 35,451 34,004 Other deferred credits and liabilities 25,081 45,832 ---------- ---------- Total Capital and Liabilities $1,858,674 $1,781,754 ========== ==========
See Notes to Financial Statements. -8-
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY STATEMENT OF INCOME UNAUDITED (Thousands of Dollars) Three Months Ended Nine Months Twelve Months Ended September 30, September 30, September 30, 2000 1999 2000 1999 2000 1999 --------- --------- --------- --------- --------- --------- OPERATING REVENUES: Electric $ 197,405 $ 261,453 $ 569,239 $ 617,029 $ 747,686 $ 770,081 Gas 21,843 17,874 100,455 91,999 141,102 125,352 --------- --------- --------- --------- --------- --------- Total operating revenues 219,248 279,327 669,694 709,028 888,788 895,433 OPERATING EXPENSES: Operations Fuel and purchased power 104,560 82,072 268,318 208,304 374,222 255,246 Gas 10,081 7,324 54,241 50,326 77,267 66,304 Other 26,505 54,944 97,951 140,923 147,650 186,308 --------- --------- --------- --------- --------- --------- 141,146 144,340 420,510 399,553 599,139 507,858 Maintenance 7,494 24,741 35,547 67,309 71,820 88,698 Depreciation and amortization 12,221 20,141 48,807 60,330 69,034 79,862 Income taxes 21,044 26,204 47,165 43,380 34,558 49,036 Other taxes 6,349 10,056 28,752 29,921 39,144 42,184 --------- --------- --------- --------- --------- --------- Total operating expenses 188,254 225,482 580,781 600,493 813,695 767,638 OPERATING INCOME 30,994 53,845 88,913 108,535 75,093 127,795 OTHER INCOME AND (DEDUCTIONS): Allowance for equity funds used during construction -- (9) -- (8) -- (37) Miscellaneous, net 10,172 533 17,988 1,614 18,404 1,204 --------- --------- --------- --------- --------- --------- Total other income and (deductions) 10,172 524 17,988 1,606 18,404 1,167 INCOME BEFORE INTEREST CHARGES 41,166 54,369 106,901 110,141 93,497 128,962 INTEREST CHARGES: Interest 9,391 10,748 28,738 31,906 39,568 41,819 Allowance for borrowed funds used during construction (53) 338 99 (43) 163 (143) --------- --------- --------- --------- --------- --------- Net interest charges 9,338 11,086 28,837 31,863 39,731 41,676 NET INCOME 31,828 43,283 78,064 78,278 53,766 87,286 PREFERRED STOCK DIVIDENDS 1,027 957 2,857 2,842 3,848 3,786 --------- --------- --------- --------- --------- --------- NET INCOME AFTER PREFERRED STOCK DIVIDENDS $ 30,801 $ 42,326 $ 75,207 $ 75,436 $ 49,918 $ 83,500 ========= ========= ========= ========= ========= =========
See Notes to Financial Statements. -9-
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY STATEMENT OF CASH FLOWS UNAUDITED (Thousands of Dollars) Nine Months Ended September 30, 2000 1999 --------- --------- Cash Flows From Operating: Net income $ 78,064 $ 78,278 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 48,807 60,330 Allowance for funds used during construction 99 (35) Deferred income taxes, net 9,503 (12,774) Deferred investment tax credits, net 607 (1,863) Changes in assets and liabilities: Receivables, net (25,423) (42,285) Materials and supplies (7,617) 5,367 Accounts and wages payable 84,403 27,134 Taxes accrued (1,465) 13,598 Other, net (47,711) 35,741 --------- --------- Net cash provided by operating activities 139,267 163,491 Cash Flows From Investing: Construction expenditures (30,602) (80,601) Allowance for funds used during construction (99) 35 --------- --------- Net cash used in investing activities (30,701) (80,566) Cash Flows From Financing: Dividends on common stock (54,171) (53,297) Dividends on preferred stock (2,857) (2,957) Redemptions - Short-term debt -- (46,700) Long-term debt (87,000) (60,000) Intercompany notes payable (7,180) -- Issuances - Long-term debt 51,100 -- Intercompany notes payable -- 91,200 --------- --------- Net cash used in financing activities (100,108) (71,754) --------- --------- Net change in cash and cash equivalents 8,458 11,171 Cash and cash equivalents at beginning of year 12,536 10,180 --------- --------- Cash and cash equivalents at end of period $ 20,994 $ 21,351 ========= ========= Cash paid during the periods: Interest (net of amount capitalized) $ 30,619 $ 28,990 Income taxes, net $ 34,509 $ 39,983
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTION: In the second quarter of 2000, the Registrant transferred its electric generating assets and liabilities, at historical net book value, to a newly created nonregulated company, AmerenEnergy Generating Company, a subsidiary of AmerenEnergy Resources Company, in exchange for a promissory note from Generating Company in the principal amount of $552 million and Generating Company common stock. The transaction also resulted in a deferred intercompany tax gain liability and related tax receivable from AmerenEnergy Generating Company in the amount of $219 million. See Note 1 in Notes to Financial Statements for further information. See Notes to Financial Statements. -10- CENTRAL ILLINOIS PUBLIC SERVICE COMPANY NOTES TO FINANCIAL STATEMENTS (UNAUDITED) September 30, 2000 Note 1 - Central Illinois Public Service Company (AmerenCIPS or the Registrant) is a subsidiary of Ameren Corporation (Ameren), which is the parent company of the following operating companies: the Registrant, Union Electric Company (AmerenUE) and AmerenEnergy Generating Company (Generating Company), a wholly-owned subsidiary of AmerenEnergy Resources Company (Resources Company). Ameren is a registered holding company under the Public Utility Holding Company Act of 1935 (PUHCA) formed in December 1997 upon the merger of CIPSCO Incorporated (the Registrant's former parent) and AmerenUE (the Merger). Both Ameren and its subsidiaries are subject to the regulatory provisions of the PUHCA. The operating companies are engaged principally in the generation, transmission, distribution and sale of electric energy and the purchase, distribution, transportation and sale of natural gas in the states of Illinois and Missouri. Contracts among the companies--dealing with jointly-operated generating facilities, interconnecting transmission lines, and the exchange of electric power--are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission (SEC). Administrative support services are provided to the Registrant by a separate Ameren subsidiary, Ameren Services Company. The Registrant serves 400,000 electric and 175,000 gas customers in a 20,000 square-mile region of central and southern Illinois. The Registrant also has a 20 percent interest in Electric Energy, Inc. (EEI), which is accounted for under the equity method of accounting. EEI owns and operates electric generating and transmission facilities in Illinois that supply electric power primarily to a uranium enrichment plant located in Paducah, Kentucky. In conjunction with the Illinois Electric Service Customer Choice and Rate Relief Law of 1997, on May 1, 2000, following the receipt of all required State and Federal regulatory approvals, the Registrant transferred its electric generating assets and liabilities, at historical net book value, to a newly created nonregulated company, Generating Company, for a promissory note from Generating Company in the principal amount of $552 million and 1,000 shares of Generating Company common stock (the Transfer). The promissory note has a term of five years and bears interest at 7 percent based on a 10-year amortization. The transferred assets represent a generating capacity of approximately 2,900 megawatts. Approximately 45 percent of the Registrant's employees were transferred to Generating Company as a part of the transaction. The significant components of the net assets transferred are as follows: (Thousands of dollars) Cash $ 6,387 Other receivable - intercompany 26,000 Material and supplies 53,806 Other current assets 5,522 Property and plant, net 635,031 --------------- Total assets transferred $ 726,746 --------------- Accounts payable $ 6,541 Other current liabilities 3,351 Other deferred credits 1,804 Deferred investment tax credits 19,728 Deferred tax liabilities, net 143,696 --------------- Total liabilities transferred $ 175,120 --------------- Net assets transferred $ 551,626 --------------- Also on May 1, 2000, an electric power supply agreement was entered into between Generating Company and a newly created nonregulated affiliate, AmerenEnergy Marketing Company (Marketing Company), also a wholly-owned subsidiary of Resources Company. On the same date, Marketing Company entered into an electric power supply agreement with the Registrant (Power Supply Agreement) to supply it sufficient power to meet native load -11- requirements. A portion of the capacity and energy supplied by Generating Company to Marketing Company will be resold to the Registrant for resale to native load customers at rates specified by the Illinois Commerce Commission (ICC) (which approximate the historical regulatory rates for generation) or to retail customers allowed choice of an electric supplier under state law at market based prices. This agreement expires December 31, 2004. In turn, the Registrant will bill these customers at rates which approximate the costs the Registrant incurs for its capacity and energy supplied by Generating Company. For the five-month period ended September 30, 2000, $157 million of the Registrant's purchased power was derived under the Power Supply Agreement. As a result of the Transfer, coupled with the Power Supply Agreement between the Registrant and Marketing Company, prospectively from May 1, 2000 through December 31, 2004, the Registrant's operating revenues will include revenues derived from its traditional transmission and distribution operations, as well as those revenues it receives from its native load customers, or new customers allowed choice of an electric supplier under state law. Sales under certain wholesale contracts and interchange sales will no longer be reflected in operating revenues of the Registrant. Instead, those revenues will be recorded at Resources Company. The Registrant's operating expenses will include those expenses it incurs under its traditional transmission and distribution operations, as well as purchased power expenses incurred under the terms of the Power Supply Agreement. In addition, as a result of the transaction, the Registrant incurred a deferred intercompany tax gain, which resulted in an additional deferred tax liability. An intercompany tax receivable with Generating Company was established for the deferred tax liability. This asset and liability will be amortized over twenty years. At September 30, 2000, the Registrant's deferred tax liability and intercompany tax receivable was $219 million. Note 2 - Financial statement note disclosures, normally included in financial statements prepared in conformity with generally accepted accounting principles, have been omitted in this Form 10-Q pursuant to the Rules and Regulations of the SEC. However, in the opinion of the Registrant, the disclosures contained in this Form 10-Q are adequate to make the information presented not misleading. See Notes to Financial Statements included in the 1999 Form 10-K for information relevant to the financial statements contained in this Form 10-Q, including information as to the significant accounting policies of the Registrant. Note 3 - In the opinion of the Registrant, the interim financial statements filed as part of this Form 10-Q reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the periods presented. The Registrant's financial statements were prepared to permit the information required in the Financial Data Schedule (FDS), Exhibit 27, to be directly extracted from the filed statements. The FDS amounts correspond to or are calculable from the amounts reported in the financial statements or notes thereto. Note 4 - Due to the effect of weather on sales and other factors which are characteristic of public utility operations, financial results for the periods ended September 30, 2000 and 1999, are not necessarily indicative of trends for any three-month, nine-month or 12-month period. Note 5 - The Registrant has transactions in the normal course of business with other Ameren subsidiaries. These transactions are primarily comprised of power purchases and sales and services received or rendered. Intercompany receivables included in other accounts and notes receivable were approximately $26 million and $12 million, respectively, as of September 30, 2000 and December 31, 1999. Intercompany payables included in accounts and wages payable totaled approximately $108 and $35 million, respectively, as of September 30, 2000 and December 31, 1999. In addition, the Registrant has the ability to borrow up to approximately $950 million from Ameren or AmerenUE or invest funds through a regulated money pool agreement. The regulated money pool was established to coordinate and provide for certain short-term cash and working capital requirements and is administered by Ameren Services Company. Interest is calculated at varying rates of interest depending on the composition of internal and external funds in the regulated money pool. At September 30, 2000, the Registrant had $126 million of intercompany borrowings outstanding and $484 million available through the regulated money pool. Note 6 - On November 9, 2000, the Registrant announced its intention to withdraw from the Midwest Independent System Operator (Midwest ISO) to become a member of the Alliance Regional Transmission Organization (Alliance RTO), pending the necessary regulatory approvals. The Alliance RTO, including its rate structure, is still subject to approval by the FERC. Accordingly, the Registrant is currently unable to determine the impact that the operation of the Alliance RTO, or the withdrawal from the Midwest ISO, will have on its financial condition, results of operations or liquidity. -12- Note 7 - In September 2000, the Registrant and its affiliate, AmerenUE, filed a request with the Illinois Commerce Commission (ICC) seeking authorization to transfer AmerenUE's Illinois-based electric and natural gas business and its Illinois-based distribution and transmission assets and personnel to the Registrant. The distribution and transmission assets and related liabilities will be transferred from AmerenUE to the Registrant at historical net book value of approximately $100 million. In connection with this transaction, the Registrant will issue an intercompany note payable to AmerenUE of approximately $50 million. The balance of the assets will be transferred to the Registrant in the form of a capital contribution. In October 2000, AmerenUE filed a request with the Missouri Public Service Commission for approval of the transfer. The transfer is also subject to regulatory filings and approvals of the FERC, the SEC and the ICC. Note 8 - Segment information for the three-month, nine-month and 12-month periods ended September 30, 2000 and 1999 is as follows: - -------------------------------------------------------------------------------- (in thousands) Electric Gas Total - -------------------------------------------------------------------------------- Three months ended September 30, 2000: Revenues $197,405 $21,843 $219,248 Operating Income (Net) 27,175 3,819 30,994 - -------------------------------------------------------------------------------- Three months ended September 30, 1999: Revenues $261,453 $17,874 $279,327 Operating Income (Net) 53,763 82 53,845 - -------------------------------------------------------------------------------- Nine months ended September 30, 2000: Revenues $569,239 $100,455 $669,694 Operating Income (Net) 77,615 11,298 88,913 - -------------------------------------------------------------------------------- Nine months ended September 30, 1999: Revenues $617,029 $91,999 $709,028 Operating Income (Net) 102,182 6,353 108,535 - -------------------------------------------------------------------------------- 12 months ended September 30, 2000: Revenues $747,686 $141,102 $888,788 Operating Income (Net) 61,120 13,973 75,093 - -------------------------------------------------------------------------------- 12 months ended September 30, 1999: Revenues $770,081 $125,352 $895,433 Operating Income (Net) 119,358 8,437 127,795 - -------------------------------------------------------------------------------- -13- PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ----------------- Reference is made to "Regulation" section in Item 1. Business of the Registrant's Form 10-K for the year ended December 31, 1999 and Item 1. Legal Proceedings in Part II of the Registrant's Form 10-Q for the quarterly period ended June 30, 2000, for information relating to litigation concerning the alleged exposure to carcinogens contained in coal tar at the Registrant's Taylorville, Illinois manufactured gas plant site. On October 4, 2000, the Illinois Supreme Court granted the Registrant's request to review a decision issued by the Illinois Appellate Court in March 2000 which upheld a $3.2 million verdict in favor of the plaintiffs against the Registrant. The Registrant believes that final disposition of this matter will not have a material adverse effect on its financial position, results of operations or liquidity. On August 24, 2000, Steven and Tina Brannon sued the Registrant, its parent, Ameren Corporation, and its affiliate, AmerenEnergy Generating Company in the Circuit Court of Christian County, Illinois. The suit alleges that the Registrant and others were negligent in the manner in which the Registrant's manufactured gas plant site was remediated in Taylorville, Illinois, therefore, wrongfully causing the death of their son. The Brannon's son was born in 1992, diagnosed with neuroblastoma in 1996, and died in 1998. The remediation occurred in 1987. Plaintiffs seek unspecified compensatory damages in excess of $50,000. The Registrant believes that the final resolution of this lawsuit will not have a material adverse effect on its financial position, results of operations or liquidity. Reference is made to Item 1. Legal Proceedings in Part II of the Registrant's Form 10-Q for the quarterly period ended June 30, 2000, for information relating to a lawsuit filed in the Circuit Court of Madison County, Illinois, by twenty-three named plaintiffs alleging negligence on behalf of the Registrant and Dover Elevator Company (Dover) for injuries arising out of an elevator accident which occurred at the Registrant's Newton Power Plant in November 1996. In mid-October 2000, a settlement agreement was entered into which (i) capped all of the plaintiffs' damages and (ii) apportioned fault between the Registrant and Dover as to approximately one-half of the plaintiffs. The settlement amount is the subject of a confidentiality agreement. Subsequently, an apportionment trial was held between the Registrant and Dover as to the remaining plaintiffs. The jury found the Registrant ninety-five percent at fault and Dover five percent at fault. The Registrant has adequate insurance to cover the settlement and the judgment entered in these proceedings. As such, the final resolution of this lawsuit will not have a material adverse effect on the Registrant's financial position, results of operations or liquidity. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits. Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements, 12 Months Ended September 30, 2000. Exhibit 27 - Financial Data Schedule. (b) Reports on Form 8-K. None. -14- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY (Registrant) By /S/ Warner L. Baxter ----------------------- Vice President and Controller (Principal Accounting Officer) Date: November 14, 2000 -15- EX-12 2 0002.txt COMPUTATION OF RATIOS
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS 12 Months Ended Year Ended December 31, September 30, --------------------------------------------------------------------------- 1995 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- ---- Thousands of Dollars Except Ratios Net Income $70,631 $77,393 $38,620 $80,147 $53,980 $53,766 Add- Extraordinary items net of tax - - 24,853 - - - ---------- -------- -------- -------- -------- ------------- Net income from continuing operations 70,631 77,393 63,473 80,147 53,980 53,766 Taxes based on income 44,483 47,286 33,922 45,412 30,763 34,806 ---------- -------- -------- -------- -------- ------------- Net income before income taxes 115,114 124,679 97,395 125,559 84,743 88,572 ---------- -------- -------- -------- -------- ------------- Add- fixed charges: Interest on long term debt 31,168 31,409 32,271 37,260 38,223 31,223 Other interest 853 4,636 2,875 1,647 3,373 7,259 Amortization of net debt premium, discount, expenses and losses 1,703 1,709 1,643 1,132 1,139 1,085 ---------- -------- -------- -------- -------- ------------- Total fixed charges 33,724 37,754 36,789 40,039 42,735 39,567 ---------- -------- -------- -------- -------- ------------- Earnings available for fixed charges 148,838 162,433 134,184 165,598 127,478 128,139 ========== ======== ======== ======== ======== ============= Ratio of earnings to fixed charges 4.41 4.30 3.64 4.13 2.98 3.23 ========== ======== ======== ======== ======== ============= Earnings required for preferred dividends: Preferred stock dividends 3,850 3,721 3,715 3,745 3,833 3,848 Adjustment to pre-tax basis 2,425 2,273 1,985 2,122 2,185 2,490 ---------- -------- -------- -------- -------- ------------- 6,275 5,994 5,700 5,867 6,018 6,338 Fixed charges plus preferred stock dividend requirements 39,999 43,748 42,489 45,906 48,753 45,905 ========== ======== ======== ======== ======== ============= Ratio of earnings to fixed charges plus preferred stock dividend requirements 3.72 3.71 3.15 3.60 2.61 2.79 ========== ======== ======== ======== ======== =============
EX-27 3 0003.txt FINANCIAL DATA SCHEDULE
UT Exhibit 27 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY 10-Q SEPTEMBER 30, 2000 FINANCIAL DATA SCHEDULE UT PUBLIC UTILITY COMPANIES AND PUBLIC UTILITY HOLDING COMPANIES APPENDIX E TO ITEM 601 (C) OF REGULATION S-K (Thousands of Dollars) 9-MOS DEC-31-2000 SEP-30-2000 PER-BOOK 823,126 0 293,320 728,260 13,968 1,858,674 120,033 0 434,899 554,932 0 80,000 463,145 0 0 0 30,000 0 0 0 730,597 1,858,674 669,694 47,165 533,616 580,781 88,913 17,988 106,901 28,837 78,064 2,857 75,207 54,171 0 139,267 0.00 0.00 Required in fiscal year-end only. Information not normally disclosed in financial statements and notes.
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