-----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, NlwsonIG88UN11idF189yEUccI1qjJml0TyDW0oyG55my6BFGbhr2qrgMRDCeovJ ZUlOZax8Dq29w7wtvPncLA== 0001002910-01-000026.txt : 20010402 0001002910-01-000026.hdr.sgml : 20010402 ACCESSION NUMBER: 0001002910-01-000026 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL ILLINOIS PUBLIC SERVICE CO CENTRAL INDEX KEY: 0000018654 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 370211380 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-03672 FILM NUMBER: 1585606 BUSINESS ADDRESS: STREET 1: 607 E ADAMS ST CITY: SPRINGFIELD STATE: IL ZIP: 62739 BUSINESS PHONE: 3145543356 MAIL ADDRESS: STREET 1: CENTRAL ILLINOIS PUBLIC SERVICE CO STREET 2: 607 E ADAMS ST CITY: SPRINGFIELD STATE: IL ZIP: 62739 10-K405 1 0001.txt FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR ( ) 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 (I.R.S. Employer Identification No.) of incorporation or organization) 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 Securities Registered Pursuant to Section 12(b) of the Act: None. Securities Registered Pursuant to Section 12(g) of the Act: Title Of Class Cumulative Preferred Stock, par value $100 per share Depositary Shares, each representing one-fourth of a share of 6.625% Cumulative Preferred Stock, par value $100 per share 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 . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X). Aggregate market value of voting stock held by non-affiliates as of March 8, 2001 determined by trader derived valuations based on current market conditions on a spread basis (excluding Preferred Stock for which prices are not publicly available): $19,156,000. Shares of Common Stock without par value, outstanding as of March 8, 2001: 25,452,373 shares (all owned by Ameren Corporation). Documents incorporated by references. Portions of the registrant's definitive proxy statement for the 2001 annual meeting are incorporated by reference into Part III. TABLE OF CONTENTS PART I Page Item 1 - Business General............................................... 1 Capital Program and Financing......................... 2 Rates................................................. 3 Regulation............................................ 3 Industry Issues....................................... 4 Item 2 - Properties................................................. 4 Item 3 - Legal Proceedings.......................................... 5 Item 4 - Submission of Matters to a Vote of Security Holders Executive Officers of the Registrant (Item 401(b) of Regulation S-K)...... 6 PART II Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters................................... 6 Item 6 - Selected Financial Data.................................... 7 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations............................. 7 Item 7A - Quantitative and Qualitative Disclosures about Market Risk. 16 Item 8 - Financial Statements and Supplementary Data................ 18 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART III Item 10 - Directors and Executive Officers of the Registrant..... 35 Item 11 - Executive Compensation................................. 35 Item 12 - Security Ownership of Certain Beneficial Owners and Management.................................... 35 Item 13 - Certain Relationships and Related Transactions......... 35 PART IV Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K 36 SIGNATURES ........................................................... 38 EXHIBITS ........................................................... 39 [FN] Not applicable and not included herein. Incorporated by reference. PART I ITEM 1. BUSINESS. GENERAL Central Illinois Public Service Company (AmerenCIPS or the Registrant) is a subsidiary of Ameren Corporation (Ameren), a holding company which is registered under the Public Utility Holding Company Act of 1935. On December 31, 1997, CIPSCO Incorporated (CIPSCO) and Union Electric Company (AmerenUE) combined with the result that the common shareholders of CIPSCO and AmerenUE became the common shareholders of Ameren, and Ameren became the owner of 100% of the common stock of AmerenUE and CIPSCO's operating subsidiaries, the Registrant and CIPSCO Investment Company (the Merger). Since the Merger, Ameren has formed a number of other subsidiaries including AmerenEnergy Resources Company (Resources Company) which is a holding company for Ameren's nonregulated electric generation, related marketing and fuel procurement businesses and Ameren Services Company which provides shared support services to the Registrant. For additional information on the Registrant's business organization, see Note 1 to the "Notes to Financial Statements" under Item 8 herein. The Registrant, an Illinois corporation, was organized in 1902. AmerenCIPS is a public utility operating company engaged in the sale of electricity and natural gas in portions of central and southern Illinois. The Registrant furnishes electric service in 557 incorporated and unincorporated communities and adjacent suburban and rural areas. The Registrant also furnishes natural gas service to retail customers in 267 incorporated and unincorporated communities and adjacent suburban and rural areas located in 41 counties of central and southern Illinois. The Registrant supplies electric service to about 325,000 customers and natural gas service to about 175,000 customers. The AmerenCIPS service territory is predominantly made up of small towns and rural areas. The territory served by the Registrant, located in 66 counties in Illinois, has an estimated population of 820,000 and is devoted principally to agriculture and diversified industrial operations. Key industries include petroleum and petrochemical industries, food processing, metal fabrication and coal mining. 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 all of its electric generating assets and related liabilities, at historical net book value, to a newly created nonregulated affiliate, AmerenEnergy Generating Company (Generating Company), a subsidiary of Resources Company (the Transfer). The Transfer was made in exchange for a subordinated promissory from Generating Company in the principal amount of $552 million and shares of Generating Company's common stock. The assets transferred by AmerenCIPS included the generating facilities located in Newton, Coffeen, Meredosia, Grand Tower and Hutsonville, Illinois as described under Item 2 herein along with related fuel, supply, transportation, maintenance and labor agreements and other rights, assets and liabilities related to the generation of electricity by the Registrant. Seven hundred and fifty employees, or approximately 45% of the Registrant's workforce were also transferred to Generating Company as part of the Transfer. As a result of the Transfer, from May 1, 2000, the Registrant's business is exclusively traditional utility transmission and distribution operations. For additional information on the Transfer including the power supply arrangement the Registrant has entered into to meet its public utility obligations, see "Overview" and "Electric Industry Restructuring" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" under Item 7 herein and Notes 1, 2 and 3 to the "Notes to Financial Statements" under Item 8 herein. For the year 2000, 80% of total operating revenues was derived from the sale of electric energy and 20% from the sale of natural gas. Electric operating revenues as a percentage of total operating revenues in both 1999 and 1998 were 85%. -1- The Registrant employed 905 persons at December 31, 2000. For information on labor agreements and other labor matters, see Note 11 to the "Notes to Financial Statements" under Item 8 herein. For additional information regarding the Registrant's business operations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" under Item 7 herein and "Financial Statements and Supplementary Data" under Item 8 herein. CAPITAL PROGRAM AND FINANCING For information on the Registrant's capital program, external cash sources and intercompany borrowings, see "Liquidity and Capital Resources" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" under Item 7 herein and Notes 3, 7, 8 and 11 to the "Notes to Financial Statements" under Item 8 herein. Financing Restrictions. The Mortgage Indenture of AmerenCIPS, as presently operative, permits the issuance of additional first mortgage bonds up to 60% of available net expenditures for bondable property, provided the "net earnings" of AmerenCIPS (before income taxes and otherwise as provided in the Mortgage Indenture) for a recent 12-month period equal at least twice the annual interest requirements on all first mortgage bonds outstanding (and on all equally secured and prior lien indebtedness) and on the bonds then to be issued. As a result of the transfer of all of AmerenCIPS' electric generating assets and liabilities to Generating Company, the more restrictive of these requirements, at December 31, 2000, was the limitation on the issuance of additional first mortgage bonds to the extent of 60% of available net expenditures for bondable property. At December 31, 2000, the 60% limitation would permit the issuance of approximately $84 million of additional first mortgage bonds on the basis of available net expenditures for bondable property. In addition, the amount of retired first mortgage bonds would permit the issuance of $100 million of additional first mortgage bonds as of March 15, 2001. The "net earnings" of AmerenCIPS for the year ended December 31, 2000, were equal to 7.08 times the interest for one year on the aggregate amount of bonds outstanding under the Mortgage Indenture at December 31, 2000. The Articles of Incorporation of AmerenCIPS provide, in effect, that so long as any AmerenCIPS preferred stock is outstanding, AmerenCIPS shall not, without the requisite vote of the holders of preferred stock, unless the retirement of such stock is provided for, (a) issue any preferred or equal ranking stock (except to retire or in exchange for an equal amount thereof) unless the "gross income available for interest" of AmerenCIPS for a recent 12-month period is at least one and one-half (1-1/2) times the sum of (i) one year's interest on all funded debt and notes maturing more than 12 months after the date of issuance of such shares and (ii) one year's dividend requirement on all preferred stock to be outstanding after such issue, or (b) issue or assume any unsecured debt securities maturing less than two years from the date of issuance or assumption (except for certain refunding or retirement purposes) if immediately after such issuance or assumption the total amount of all such unsecured debt securities would exceed 20% of the sum of all secured debt securities and the capital and surplus of AmerenCIPS. For the year ended December 31, 2000, the "gross income available for interest" of AmerenCIPS equalled 3.16 times the sum of the annual interest charges and dividend requirements on all such funded debt, notes and preferred stock outstanding at December 31, 2000. Such "gross income available for interest" was sufficient under the test to support the issuance of additional preferred stock (assuming an annual dividend rate on such preferred stock of 7.25%) in an amount in excess of the maximum amount ($185 million) of authorized and unissued preferred stock under the Articles of Incorporation. -2- RATES For the year 2000, approximately 81% of the Registrant's electric operating revenues were based on rates regulated by the Illinois Commerce Commission (ICC) and 19% were regulated by the Federal Energy Regulatory Commission (FERC) of the U. S. Department of Energy. The Registrant's gas operating revenues for the year 2000 were based on rates regulated exclusively by the ICC. For information on rate matters in these jurisdictions, see "Results of Operations" and "Electric Industry Restructuring" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" under Item 7 herein and Note 2 to the "Notes to Financial Statements" under Item 8 herein. REGULATION General Matters. The Registrant is subject to regulation by the Securities and Exchange Commission (SEC) and, as a subsidiary of Ameren, is subject to the provisions of the Public Utility Holding Company Act of 1935. The Registrant is subject to regulation by the ICC as to rates, service, accounts, issuance of equity securities, issuance of debt having a maturity of more than twelve months, mergers, and various other matters. The Registrant is also subject to regulation by the FERC as to rates and charges in connection with the transmission of electric energy in interstate commerce and the sale of such energy at wholesale in interstate commerce, mergers, and certain other matters. Authorization to issue debt having a maturity of twelve months or less is obtained from the SEC. For information on regulatory matters in these jurisdictions, including the current status of electric utility restructuring in Illinois, see "Liquidity and Capital Resources" and "Electric Industry Restructuring" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" under Item 7 herein and Note 2 to the "Notes to Financial Statements" under Item 8 herein. Environmental Matters. The Registrant, in certain of its operations, is subject to federal, state and local environmental regulations relating to the safety and health of personnel, the public and the environment. Failure to comply with those statutes or regulations could have material adverse effects on the Registrant, including the imposition of criminal or civil liability by regulatory agencies or civil fines and liability to private parties, and the required expenditure of funds to bring the Registrant into compliance. The Registrant is in material compliance with existing regulations. In connection with the Transfer, the Registrant has agreed to indemnify Generating Company for environmental claims relating to the transferred generating facilities for events or occurrences arising prior to May 1, 2000. On December 22, 1995, a complaint was filed in the Circuit Court for the Seventh Judicial Circuit, Sangamon County, Illinois against the Registrant and several other defendants. The complaint sought unspecified monetary damages and alleged that, as a result of exposure to carcinogens contained in coal tar at the AmerenCIPS Taylorville manufactured gas plant site, plaintiffs' children had suffered from a rare form of childhood cancer known as "neuroblastoma". In 1998, a jury awarded plaintiffs $3.2 million. In March 2000, the Illinois Appellate Court, on an appeal by AmerenCIPS, upheld the plaintiffs' verdict. In October 2000, the Illinois Supreme Court granted the Registrant's request to review the Illinois Appellate Court's decision. 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 Ameren, AmerenCIPS and Generating Company in the Circuit Court of Christian County, Illinois. The suit alleges that AmerenCIPS and others were negligent in the manner in which AmerenCIPS' 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. -3- On August 2, 1996, the Illinois Attorney General filed a complaint with the Illinois Pollution Control Board alleging various violations of wastewater discharge permit conditions and ground water standards at AmerenCIPS' (now Generating Company's) Hutsonville Power Station. The complaint sought monetary penalties and the award of attorney fees. In accordance with the terms of a settlement agreement with the Illinois Environmental Protection Agency and the Illinois Attorney General, Generating Company has constructed a new lined fly ash basin at the Hutsonville Power Station and intends to close the existing unlined basin. The proposed settlement has been presented to the Board for approval. The Registrant believes that the final resolution of this matter will not have a material adverse effect on its financial position, results of operations or liquidity. See Note 11 to the "Notes to Financial Statements" under Item 8 herein for a further discussion of environmental matters. INDUSTRY ISSUES The Registrant is facing issues common to the electric and gas utility industries which have emerged during the past several years. These issues include: the potential for more intense competition and for changing the structure of regulation; changes in the structure of the industry as a result of changes in federal and state laws, including the formation of unregulated generating entities; on-going consideration of additional changes of the industry by federal and state authorities; continually developing environmental laws, regulations and issues; public concern about the siting of new facilities; proposals for demand side management programs; and global climate issues. The Registrant is monitoring these issues and is unable to predict at this time what impact, if any, these issues will have on its operations, financial condition, or liquidity. For additional information on certain of these issues, see "Electric Industry Restructuring" in Management's Discussion and Analysis of Financial Condition and Results of Operations" under Item 7 herein and Notes 2 and 11 to the "Notes to Financial Statements" under Item 8 herein. ITEM 2. PROPERTIES. For information on the Registrant's construction program, electric transmission assets, the Transfer and the proposed AmerenUE Illinois property transfer, see "General" under Item 1 herein, "Results of Operations", "Liquidity and Capital Resources" and "Electric Industry Restructuring" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" under Item 7 herein and Notes 2 and 11 to the "Notes to Financial Statements" under Item 8 herein. The Registrant owns 20% of the capital stock of Electric Energy, Inc. (EEI), and its affiliate, AmerenUE, owns 40% of such stock. The balance is held by two other sponsoring companies -- Kentucky Utilities Company and Dynegy Midwest Generation, Inc. EEI owns and/or operates electric generating and transmission facilities in Illinois that supply electric power primarily to a uranium enrichment plant located in Paducah, Kentucky. As of December 31, 2000, the Registrant owned approximately 1,900 circuit miles of electric transmission lines. The Registrant also owned 4,800 miles of natural gas transmission and distribution mains, four underground gas storage fields and one propane-air gas plant used to supplement the available pipeline supply of natural gas during periods of abnormally high demands. Other properties of the Registrant include distribution lines, underground cable, office buildings, warehouses, garages and repair shops. Substantially all of AmerenCIPS' property is subject to the direct first lien of an Indenture of Mortgage or Deed of Trust dated October 1, 1941, as amended and supplemented. -4- The following table sets forth information with respect to the Registrant's electric generating facilities which were transferred to Generating Company on May 1, 2000. As a part of the Transfer, these facilities and the real property on which they are located were released from the above referenced mortgage lien. Energy Rated Capacity Source Plant Location (net Megawatts) ------ ----- -------- --------------- Coal Newton Newton, IL 1,110 Coffeen Coffeen, IL 900 Grand Tower* Grand Tower, IL 190 Hutsonville (Units 3 & 4) Hutsonville, IL 153 Meredosia (Units 1, 2 & 3) Meredosia, IL 339 ------- Total Coal 2,692 Oil Meredosia (Unit 4) Meredosia, IL 168 Hutsonville (Diesel) Hutsonville, IL 3 --------- Total Oil 171 ------- TOTAL 2,863 ====== * The Grand Tower Plant is being repowered with two gas-fired combustion turbine generating units. ITEM 3. LEGAL PROCEEDINGS. The Registrant is involved in legal and administrative proceedings before various courts and agencies with respect to matters arising in the ordinary course of business, some of which involve substantial amounts. Management believes that the final disposition of these proceedings will not have a material adverse effect on its financial position, results of operations or liquidity. For additional information on legal and administrative proceedings, see "Regulation - Environmental Matters" under Item 1 herein, "Liquidity and Capital Resources" and "Electric Industry Restructuring" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" under Item 7 herein, and Notes 2 and 11 to the "Notes to Financial Statements" under Item 8 herein. ------------------------------------------ Statements made in this report 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 and financial performance. 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 subsequent securities filings, could cause results to differ materially from management expectations as suggested by such "forward-looking" statements: the effects of regulatory actions, including changes in regulatory policy; changes in laws and other governmental actions; the impact on the Registrant of current -5- 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; the effects of withdrawal from the Midwest ISO and membership in the Alliance RTO; future market prices for purchased power and natural gas, including the use of financial instruments; average rates for electricity in the Midwest; business and economic conditions; interest rates; weather conditions; the impact of current environmental regulations on utilities; monetary and fiscal policies; future wages and employee benefits costs; and legal and administrative proceedings. INFORMATION REGARDING EXECUTIVE OFFICERS REQUIRED BY ITEM 401(b) OF REGULATION S-K: Age At Date First Elected Name 12/31/00 Present Position or Appointed ---- -------- ---------------- ------------- G. L. Rainwater 54 President, Chief Executive Officer 1/1/98 and Director 12/2/97 T. R. Voss 53 Senior Vice President 6/1/99 W. L. Baxter 39 Vice President, 4/22/99 Controller and 12/31/97 Director 4/22/99 M. J. Montana 54 Vice President 4/28/98 G. W. Moorman 57 Vice President 6/1/88 C. D. Nelson 47 Vice President 4/28/98 S. R. Sullivan 40 Vice President, General Counsel and Secretary 11/7/98 J. E. Birdsong 46 Treasurer 12/31/97 All officers are elected or appointed annually by the Board of Directors following the election of such Board at the annual meeting of stockholders held in April. Except for Mr. Sullivan, each of the above-named executive officers has been employed by the Registrant for more than five years in executive or management positions. Mr. Sullivan was previously employed by Anheuser Busch Companies, Inc. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. There is no market for the Registrant's Common Stock since all shares are owned by its parent, Ameren. -6- ITEM 6. SELECTED FINANCIAL DATA.
For the Years Ended December 31 (In Thousands) 2000 1999 1998 1997 1996 - -------------------------- ---- ---- ---- ---- ---- Operating revenues $ 893,898 $ 928,122 $ 847,424 $ 852,075 $ 881,102 Operating income 91,813 94,715 120,044 102,495 116,531 Net income 79,362 53,980 80,147 38,620 77,393 Preferred stock dividends 3,882 3,833 3,745 3,715 3,721 Net income after preferred stock dividends 75,480 50,147 76,402 34,905 73,672 Common stock dividends 54,614 90,342 72,285 43,300 62,950 As of December 31, Total assets $1,867,141 $1,781,754 $1,764,397 $1,788,707 $1,795,353 Long-term debt 463,174 493,625 528,446 558,474 421,228 Total common stockholder's equity 555,244 534,378 575,370 572,759 581,224
ITEM 7. 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), which is 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, the Registrant's operating revenues will only include revenues derived from its traditional transmission and distribution operations, and 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 only include those expenses it incurs under its traditional transmission and distribution operations, and for purchased power under an electric power supply agreement with Resources Company's newly created marketing subsidiary, AmerenEnergy Marketing Company (the Power Supply Agreement). See "Electric Industry Restructuring" below and Note 2 - Regulatory Matters under Notes to Financial Statements for further discussion. RESULTS OF OPERATIONS Earnings Earnings for 2000, 1999 and 1998, were $75 million, $50 million and $76 million, respectively. 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, expenses relating to the withdrawal from the electric transmission related Midwest Independent System Operator (Midwest ISO), charges for coal contract terminations, a targeted employee separation plan (TSP), changes in interest expense and changes in income and property taxes. In the fourth quarter of 2000, the Registrant recorded an $8 million nonrecurring charge to earnings in connection with its withdrawal from the Midwest ISO. The charge reduced earnings $5 million, net of income taxes (see discussion below under "Electric Industry Restructuring" and Note 2 - Regulatory Matters under Notes to Financial -7- Statements for further information). In thefourth quarter of 1999, the Registrant recorded a $52 million nonrecurring charge to earnings in connection with coal contract terminations with two coal suppliers. The charge reduced earnings $31 million, net of income taxes (see discussion below under "Electric Operations" and Note 11 - Commitments and Contingencies under Notes to Financial Statements for further information). In 1998, the Registrant recorded a nonrecurring charge to earnings in connection with a targeted separation plan it offered to employees in July 1998. That charge reduced earnings $4 million, net of income taxes, (see Note 4 - Targeted Separation Plan under Notes to Financial Statements for further information). The significant items affecting revenues, expenses and earnings for the years ended December 31, 2000, 1999 and 1998 are detailed in the following pages. Electric Operations Electric Revenues Variations from Prior Year - -------------------------------------------------------------------------------- (In Millions) 2000 1999 1998 - -------------------------------------------------------------------------------- Rate variations $ - $ (7) $(5) Effect of abnormal weather (11) (16) 13 Growth and other 15 9 14 Interchange sales (82) 88 (1) - -------------------------------------------------------------------------------- $(78) $74 $21 - -------------------------------------------------------------------------------- Electric revenues for 2000 decreased $78 million compared to 1999 primarily due to a decrease in interchange sales as a result of the Transfer and unfavorable weather. These decreases were offset in part by an increase in industrial sales of 29 percent, resulting primarily from a new contract with a large industrial customer. Electric revenues for 1999 increased $74 million, compared to 1998, primarily due to an 11% increase in total kilowatthour sales. This increase was primarily driven by a 37% increase in interchange sales, due to strong marketing efforts. This increase was partially offset by a residential rate decrease (see Note 2 - Regulatory Matters under notes to Financial Statements for further information). In addition, revenues were lower due to a 1% decrease in native sales, resulting from milder weather. Electric revenues for 1998 increased $21 million, compared to 1997. Revenues increased primarily due to higher sales to retail customers within the Registrant's service territory, as a result of warm summer weather and economic growth in the service area. Weather-sensitive residential and commercial sales increased 6% and 4%, respectively, while industrial sales grew 4%. These increases were partially offset by a 5% rate decrease to residential customers beginning in August 1998 (see Note 2 - Regulatory Matters under Notes to Financial Statements for further information). Fuel and Purchased Power Variations from Prior Year - -------------------------------------------------------------------------------- (In Millions) 2000 1999 1998 - -------------------------------------------------------------------------------- Fuel: Generation $(110) $17 $(25) Price (5) (18) (2) Generation efficiencies and other (4) (7) (6) Coal contract termination payments (52) 52 - Purchased power 227 40 21 - -------------------------------------------------------------------------------- $ 56 $84 $(12) - -------------------------------------------------------------------------------- Fuel and purchased power costs for 2000 increased $56 million compared to 1999, primarily due to an overall net increase in purchased power and generation 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 costs due to the termination of certain coal contracts in the fourth quarter of 1999 and the Transfer. The $84 million increase in fuel and purchased power costs for 1999, compared to 1998, was primarily due to increased generation and purchased power, resulting from higher sales volume and coal contract termination payments discussed below, partially offset by lower fuel costs. In the fourth quarter of 1999, the Registrant and two of its coal suppliers executed agreements to terminate their existing coal supply contracts effective December 31, 1999. Under these agreements, the Registrant made termination payments to the suppliers totaling approximately $52 million. These termination payments were recorded as a -8- nonrecurring charge in the fourth quarter of 1999. Total estimated pretax fuel cost savings of $27 million were realized in 2000 by Ameren. See Note 11 - Commitments and Contingencies under Notes to Financial Statements for further information. The $12 million decrease in fuel and purchased power costs for 1998, compared to 1997, was primarily driven by lower fuel costs due to lower fuel prices and utilizing joint dispatch generation. Upon consummation of the Merger, AmerenUE and AmerenCIPS began jointly dispatching generation, therefore allowing Ameren to utilize the most cost efficient plants of both operating companies to serve customers in either service territory. Gas Operations Gas revenues for 2000 increased $44 million compared to 1999, due primarily to higher gas costs recovered through the Registrant's purchased gas adjustment clause and higher residential and commercial sales as a result of colder weather in the fourth quarter of 2000. Gas revenues in 1999 increased $7 million compared to 1998, primarily due to a gas rate increase which became effective in February 1999 (see Note 2 - Regulatory Matters under Notes to Financial Statements for further information) and higher gas costs recovered through the Registrant's purchased gas adjustment clause. These increases were partially offset by a decline in retail sales of 10%, resulting primarily from milder winter weather, as well as a decrease in off-system sales of gas to others. Gas revenues in 1998 decreased $26 million compared to 1997, primarily due to a 7% decline in retail sales resulting from milder winter weather and lower gas costs recovered through the Registrant's purchase gas adjustment clause. Gas costs in 2000 increased $37 million compared to 1999, primarily due to higher retail sales and higher gas prices. Gas costs in 1999 increased $4 million compared to 1998. This increase in gas costs was primarily due to higher gas prices, partially offset by lower total sales. Gas costs in 1998 declined $28 million compared to 1997. This decrease in gas costs was due to lower sales and lower gas prices. Other Operating Expenses Other operating expense variations in 1998 through 2000 reflected recurring factors such as growth, inflation, the Transfer, labor and benefit costs, and charges for estimated costs relating to withdrawal from the Midwest ISO and the TSP, as discussed below. In November 2000, the Registrant announced that it is withdrawing from the Midwest ISO to become a member of the Alliance Regional Transmission Organization (Alliance RTO). In the fourth quarter of 2000, the Registrant recorded a pretax nonrecurring charge to earnings of $8 million ($5 million after income taxes) as a result of the Registrant's decision to withdraw from the Midwest ISO. This charge relates to the Registrant's estimated obligation under the Midwest ISO agreement for costs incurred by the Midwest ISO, plus estimated exit costs. See discussions below under "Electric Industry Restructuring" and Note 2 - Regulatory Matters under Notes to Financial Statements for further information. In 1998, Ameren announced plans to reduce its other operating expenses, including plans to eliminate approximately 400 employee positions by mid-1999 through a hiring freeze and the TSP. During the third quarter of 1998, a nonrecurring, pretax charge of $7 million was recorded, representing the Registrant's share of costs incurred to implement the TSP. The elimination of these positions, exclusive of the nonrecurring charge, reduced the Registrant's operating expenses approximately $4 million in 1998 and approximately $7 million in 1999, and is expected to reduce the Registrant's operating expenses by approximately $6 million to $7 million each year thereafter. See Note 4 - Targeted Separation Plan under Notes to Financial Statements for further information. Other operations expenses, excluding the Midwest ISO related nonrecurring charge discussed above, decreased $65 million in 2000, compared to 1999, primarily due to lower employee benefit costs resulting from the Transfer as well as lower information system-related costs. Other operating expenses increased $11 million in 1999, compared to 1998, primarily due to increased postretirement expenses resulting from changes in actuarial assumptions, increased injuries and damages expenses based on claims experience, expenses associated with electric industry deregulation in Illinois and the Year 2000 project. These increases were partially offset by a reduced workforce, coupled with the fact that 1998 expenses included the charge for the TSP. The $19 million increase in other operating expenses in 1998, compared to 1997, were primarily due to the charge for the TSP and increased information system-related costs. Maintenance expenses decreased $59 million in 2000, compared to 1999, primarily due to decreased power plant maintenance resulting from the Transfer. Maintenance expenses increased $32 million in 1999, compared to 1998. This increase was primarily due to increased power plant maintenance. In 1998, maintenance expenses decreased $4 million from the prior year, primarily due to less scheduled power plant maintenance. -9- Depreciation and amortization expense decreased $19 million in 2000, compared to 1999, due to decreased depreciable property, primarily resulting from the Transfer. Depreciation and amortization expense increased $6 million in 1999, compared to 1998. This increase was primarily due to increased depreciable property. In 1998, depreciation and amortization expense decreased $8 million from the prior year due to the write-off of generation-related regulatory assets in Illinois during the fourth quarter of 1997. Taxes Income tax expense from operations increased $13 million in 2000, compared to 1999, due to a higher pretax income. Income tax expense from operations decreased $15 million in 1999, compared to 1998, due to lower pretax income. Income tax expense from operations increased $12 million in 1998, compared to 1997, due to higher pretax income and a higher effective tax rate. Other tax expense decreased $17 million in 1999, compared to 1998, primarily due to a decrease in gross receipts taxes. This decrease is the result of the restructuring of the Illinois public utility tax whereby gross receipts taxes are no longer recorded as electric revenue and gross receipts tax expense. Other Income and Deductions Miscellaneous, net increased $26 million in 2000, compared to 1999, 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 2 - Regulatory Matters under Notes to Financial Statements for further discussion of the promissory note.) In 1999, miscellaneous, net increased $3 million, compared to 1998, primarily due to losses on the disposal of property realized in 1998. In 1998, miscellaneous, net increased $3 million primarily due to higher merger-related expenses incurred in the prior year. Interest Interest expense decreased $2 million in 2000, compared to 1999, primarily due to the redemption of long-term debt, partially offset by an increase in intercompany notes payable resulting from funds borrowed from the regulated money pool (see Note 7 - Short-Term Borrowings under Notes to Financial Statements for further information) and funds owed to Generating Company as a result of the Transfer. Interest expense increased $3 million in 1999, compared to 1998, due to an increase in intercompany notes payable resulting from funds borrowed from the regulated money pool (see Note 7 - Short-Term Borrowings under Notes to Financial Statements for further information), partially offset by the redemption of short-term debt. Interest expense increased $3 million in 1998, compared to 1997, due to a higher amount of debt outstanding, partially offset by a decrease in other interest. Balance Sheet The $36 million increase in trade accounts receivable was due primarily to higher sales and revenues in November and December 2000, compared to the same 1999 period. The variations in property and plant, net, intercompany notes receivable, intercompany tax receivable, materials and supplies inventory, regulatory assets, accumulated deferred income taxes and regulatory deferred investment tax credits were due to the Transfer. See "Electric Industry Restructuring" and Note 2 - Regulatory Matters under Notes to Financial Statements for further discussion. The changes in accounts and wages payable and taxes accrued resulted from the timing of various payments to taxing authorities and suppliers, including the accrual for the nonrecurring charge in connection with the Registrant's withdrawal from the Midwest ISO, as well as a decrease in the number of employees, resulting from the Transfer. The $90 million increase in intercompany notes payable was due to funds borrowed from the regulated money pool (see Note 7 - Short-Term Borrowings under Notes to Financial Statements for further discussion) and funds owed to Generating Company as a result of the Transfer. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities totaled $62 million for 2000, compared to $166 million for 1999 and $123 million in 1998. Cash flows used in investing activities totaled $41 million, $95 million and $68 million, for the years ended December 31, 2000, 1999 and 1998, respectively. Expenditures in 2000 for constructing new or improving existing facilities were $41 million. Construction expenditures in 2000 decreased from 1999 due to the effects of the Transfer. -10- See "Electric Industry Restructuring" and Note 2 - Regulatory Matters under Notes to Financial Statements for further discussion. Capital expenditures are expected to approximate $54 million in 2001. For the five-year period 2001 through 2005, construction expenditures are estimated at $319 million. Cash flows used in financing activities were $4 million for 2000, compared to $68 million for 1999 and $74 million for 1998. The Registrant's financing activities during 2000 included the issuance of $51 million of long-term debt and $90 million of intercompany notes payable, the redemption of $87 million of long-term debt and the payment of dividends. 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 commercial paper (maturities generally within 1 to 45 days) and bank loans. At December 31, 2000, the Registrant had committed bank lines of credit 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 year-end, the Registrant had no outstanding short-term borrowings. Also, the Registrant has the ability to borrow up to approximately $914 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 December 31, 2000, the Registrant had $197 million of intercompany borrowings outstanding under the regulated money pool and $727 million available through the regulated money pool. See Note 7 - Short-Term Borrowings under Notes to Financial Statements for further information. 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 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 similar amount. The pollution control loan obligations referred to above have maturity dates ranging from 2014 to 2028 and bear interest at variable rates. See further discussion of Generating Company's promissory note to the Registrant below, under "Electric Industry Restructuring" and in Note 2 - Regulatory Matters under Notes to Financial Statements for further discussion. During the course of Ameren's resource planning, several alternatives are being considered to satisfy regulatory load requirements for 2001 and beyond for the Registrant, AmerenUE and Resources Company. One of these alternatives was for AmerenUE to transfer its Illinois-based electric and natural gas businesses and certain of its Illinois-based distribution and transmission assets and personnel to the Registrant (see Note 2- Regulatory Matters under Notes to Financial Statements for further discussion). The assets and related liabilities were proposed to be transferred from AmerenUE to the Registrant at historical net book value. In March 2001, Ameren decided it will no longer pursue this transfer and will be taking the necessary action to withdraw its pending requests for regulatory approvals. Other alternatives being considered include proposals for the purchase of 450 megawatts of capacity and energy for the summer of 2001, among other things. At this time, management is unable to predict which course of action it will pursue to satisfy these requirements and their ultimate impact on the Registrant's financial position, results of operations or liquidity. 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, over the past two years, 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 reduction alternatives could require nonrecurring payments of employee separation benefits. Management is unable to predict to what extent, these alternatives to reduce its overall cost structure will be executed as well as determine the impact of these actions on the Registrant's future financial position, results of operations or liquidity. -11- RATE MATTERS See Note 2 - Regulatory Matters under Notes to Financial Statements for a discussion of rate matters. ELECTRIC INDUSTRY RESTRUCTURING Steps taken and being considered at the federal and state levels continue to change the structure of the electric industry and utility regulation, and encourage increased competition. At the federal level, the Energy Policy Act of 1992 reduced various restrictions on the operation and ownership of independent power producers and gave the Federal Energy Regulatory Commission (FERC) the authority to order electric utilities to provide transmission access to third parties. During 2000 and in early 2001, deregulation laws established in the state of California, coupled with high energy prices, increasing demands for power by users in that state, transmission constraints and limited generation resources, among other things, negatively impacted several major electric utilities in that state. Federal and state regulators and legislators have proposed and implemented, in part, different courses of action to attempt to address these issues. The Registrant does not maintain utility operations in the state of California, nor does it provide energy directly to utilities in that state. At this time, the Registrant is uncertain what impact, if any, changes in deregulation laws will have on future federal and state deregulation laws, which could directly impact the Registrant's future financial position, results of operations or liquidity. In April 1996, the FERC issued Order 888 and Order 889, which are intended to promote competition in the wholesale electric market. The FERC requires transmission-owning public utilities, such as AmerenCIPS, to provide transmission access and service to others in a manner similar and comparable to that which the utilities have by virtue of ownership. Order 888 requires that a single tariff be used by the utility in providing transmission service. Order 888 also provides for the recovery of strandable costs, under certain conditions, related to the wholesale business. Order 889 established the standards of conduct and information requirements that transmission owners must adhere to in doing business under the open access rule. Under Order 889, utilities must obtain transmission service for their own use in the same manner their customers will obtain service, thus mitigating market power through control of transmission facilities. In addition, under Order 889, utilities must separate their merchant function (buying and selling wholesale power) from their transmission and reliability functions. In 1998, the Registrant joined a group of companies that originally supported the formation of the Midwest ISO. An ISO operates, but does not own, electric transmission systems and maintains system reliability and security, while facilitating wholesale and retail competition through the elimination of "pancaked" transmission rates. The Midwest ISO is regulated by the FERC. The FERC conditionally approved the formation of the Midwest ISO in September 1998. The Illinois Commerce Commission (ICC) has authorized the Registrant to join the Midwest ISO. In December 1999, the FERC issued Order 2000 relating to Regional Transmission Organizations (RTOs) that would meet certain characteristics such as size and independence. RTOs, including ISOs, are entities that ensure comparable and non-discriminatory access to regional electric transmission systems. Order 2000 calls on all transmission owners to join RTOs. Following the announcements of Commonwealth Edison and Illinois Power of their intent to withdraw from the Midwest ISO and join the Alliance RTO, the Registrant determined that the operational configuration of the Midwest ISO was unacceptable and announced its withdrawal in November 2000. The Registrant decided to withdraw to ensure the continued reliable and efficient operation of its transmission system. As a result of the Registrant's decision to withdraw from the Midwest ISO, in the fourth quarter of 2000, the Registrant recorded a pretax nonrecurring charge to earnings of $8 million ($5 million after income taxes). This charge relates to the Registrant's estimated obligation under the Midwest ISO agreement for costs incurred by the Midwest ISO, plus estimated exit costs. In January 2001, the Registrant announced that it had signed an agreement to join the Alliance RTO. Also, in January 2001, the FERC conditionally approved the formation, including the rate structure, of the Alliance RTO. In February 2001, in a proceeding before the FERC, the Alliance RTO and the Midwest ISO reached an agreement that enables the Registrant to withdraw from the Midwest ISO and to join the Alliance RTO. This settlement agreement remains subject to FERC approval. The Registrant's transfer of control and operation of its transmission assets to the Alliance RTO is also subject to ICC approval. At this time, the Registrant is unable to determine the impact that -12- its withdrawal from the Midwest ISO and its participation in the Alliance RTO will have on its future financial condition, results of operations or liquidity. 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. Major provisions of the Law include the phasing-in through 2002 of retail direct access, which allows customers to choose their electric generation suppliers. The phase-in of retail direct access began on October 1, 1999, with large commercial and industrial customers principally comprising the initial group. The remaining commercial and industrial customers were offered choice on December 31, 2000. Commercial and industrial customers represent approximately 45% of the Registrant's total sales. As of December 31, 2000, the impact of retail direct access on the Registrant's financial condition, results of operations and liquidity was immaterial. Retail direct access will be offered to residential customers on May 1, 2002. In addition, the Law included a 5% rate decrease for residential customers that became effective in August 1998. This rate decrease reduced electric revenues by approximately $11 million annually compared to pre-Law rates, based on estimated levels of sales and assuming normal weather conditions. (See Note 2 - Regulatory Matters under Notes to Financial Statements for further information.) In 1998, the Registrant eliminated its Uniform Fuel Adjustment Clause (FAC) as allowed by the Law, which has benefited shareholders since 1998 (see Note 1 - Summary of Significant Accounting Policies under Notes to Financial Statements for further information). The Law contains a provision allowing for the potential recovery of a portion of strandable costs, which represent costs that would not be recoverable in a restructured environment, through a transition charge collected from customers who choose an alternate electric supplier. In addition, the Law contains a provision requiring a portion of excess earnings (as defined under the Law) for the years 1998 through 2004 to be refunded to customers. See Note 2 - - Regulatory Matters under Notes to Financial Statements for further information. 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 Generating Company 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 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. In conjunction with the Transfer, an electric power supply agreement was entered into between Generating Company and its newly created nonregulated affiliate, AmerenEnergy Marketing Company (Marketing Company), also a wholly owned subsidiary of Resources Company. In addition, Marketing Company entered into an electric power supply agreement with the Registrant to supply it sufficient energy and capacity to meet its obligations as a public utility through December 31, 2004. 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. 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 eight-month period ended December 31, 2000, $257 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 December 31, 2000, the Registrant's deferred tax liability and intercompany tax receivable was $211 million. -13- See Note 2 - Regulatory Matters under Notes to Financial Statements for further discussion of the Transfer. In summary, the potential negative consequences associated with electric industry restructuring could be significant and could include the impairment and writedown of certain assets, including plant and net regulatory assets, lower revenues, reduced profit margins and increased costs of capital and operations expenses. Conversely, a deregulated marketplace can provide earnings enhancement opportunities. The Registrant will continue to focus on cost control to ensure that it maintains a competitive cost structure. Also, in Illinois, the actions of Ameren included the establishment of a nonregulated generating subsidiary and the expansion of its generation assets, which strengthened its trading and marketing operations to maintain its current customers and obtain new customers, and the enhancement of its information systems. The Registrant believes that these actions position Ameren and the Registrant well in the competitive Illinois marketplace. At this time, the Registrant is unable to predict the ultimate impact of electric industry restructuring on the Registrant's future financial condition, results of operations or liquidity. CONTINGENCIES See Note 2 - Regulatory Matters and Note 11 - Commitments and Contingencies under Notes to Financial Statements for material issues existing at December 31, 2000. MARKET RISK RELATED TO FINANCIAL INSTRUMENTS AND COMMODITY INSTRUMENTS Market risk represents the risk of changes in value of a physical asset or 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 the Registrant's, 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 and the Registrant also face 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. Ameren's risk management objective is to optimize its physical generating assets within prudent risk parameters. Risk management policies are set by a Risk Management Steering Committee, which is comprised of senior-level Ameren officers. 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 and fixed-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-rate preferred stock, as of December 31, 2000, continued to be outstanding throughout 2001, and that the average interest rates for these instruments increased one percent over 2000. The model does not consider the effects of the reduced level of potential 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 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. Since 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 2 - Regulatory Matters under Notes to Financial Statements for further discussion). -14- ACCOUNTING MATTERS In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 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. The intended use of the derivatives and their designation as either a fair value hedge, a cash flow hedge, or a foreign currency hedge will determine when the gains or losses on the derivatives are to be reported in earnings and when they are to be reported as a component of other comprehensive income in stockholder's equity. In June 1999, the FASB issued SFAS 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. The Registrant is adopting SFAS 133 in the first quarter of 2001. As of January 1, 2001, the adoption of SFAS 133 is not expected to have a material effect on the Registrant. However, the Derivatives Implementation Group (DIG), a committee of the FASB responsible for providing guidance on the implementation of SFAS 133, has not reached a conclusion regarding the appropriate accounting treatment of certain types of energy contracts under SFAS 133. The Registrant is unable to predict when this issue will ultimately be resolved and the impact the resolution will have on the Registrant's future financial position, results of operations or liquidity. Implementation of SFAS 133 will likely increase the volatility of the Registrant's earnings in future periods. EFFECTS OF INFLATION AND CHANGING PRICES The Registrant's rates for retail electric and gas utility service are generally regulated by the ICC. Wholesale electric rates are regulated by the FERC. The current replacement cost of the Registrant's utility plant substantially exceeds its recorded historical cost. Under existing regulatory practice, only the historical cost of plant is recoverable from customers. As a result, cash flows designed to provide recovery of historical costs through depreciation might not be adequate to replace utility plant in future years. In addition, the impact on common stockholders is mitigated to the extent depreciable property is financed with debt that is repaid with dollars of less purchasing power. Changes in gas costs relating to retail gas utility services are generally reflected in billings to customers through a purchased gas adjustment clause. Inflation continues to be a factor affecting operations, earnings, stockholder's equity and financial performance. SAFE HARBOR STATEMENT Statements made in this report 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 and financial performance. 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 subsequent securities filings, could cause results to differ materially from management expectations as suggested by such "forward-looking" statements: the effects of regulatory actions, including changes in regulatory policy; 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; the effects of withdrawal from the Midwest ISO and membership in the Alliance RTO; future market prices for purchased power and natural gas, including the use of financial instruments; average rates for electricity in the Midwest; business and economic conditions; interest rates; weather conditions; the impact of current environmental regulations on utilities; monetary and fiscal policies; future wages and employee benefits costs; and legal and administrative proceedings. -15- ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Information required to be reported by this item is included under "Market Risk Related to Financial Instruments and Commodity Instruments" in "Management's Discussion and Analysis of Financial Conditions and Results of Operations" under Item 7 herein and Notes 5 and 12 to the "Notes to Financial Statements" under Item 8 herein. -16- REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Central Illinois Public Service Company: In our opinion, the financial statements listed in the index appearing under Item 14(a)(1) on Page 36 present fairly, in all material respects, the financial position of Central Illinois Public Service Company at December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under 14(a)(1) on Page 36 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements. These financial statements and the financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP St. Louis, Missouri February 5, 2001 -17- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY BALANCE SHEET (Thousands of Dollars, Except Shares)
December 31, December 31, ASSETS 2000 1999 - ------ ---- ---- Property and plant, at original cost: Electric $1,195,418 $2,422,002 Gas 273,573 267,909 ------------------ ---------------- 1,468,991 2,689,911 Less accumulated depreciation and amortization 654,897 1,260,582 ------------------ ---------------- 814,094 1,429,329 Construction work in progress 6,558 43,435 ------------------ ---------------- Total property and plant, net 820,652 1,472,764 ------------------ ---------------- Investments and other assets: Intercompany notes receivable 511,701 - Intercompany tax receivable 194,975 - Other assets 17,085 17,722 ------------------ ---------------- Total investments and other assets 723,761 17,722 Current assets: Cash and cash equivalents 29,801 12,536 Accounts receivable - trade (less allowance for doubtful accounts of $1,777 and $1,828, respectively) 160,996 124,587 Other accounts and notes receivable 25,035 20,875 Intercompany notes receivable 39,925 - Intercompany tax receivable 15,809 - Materials and supplies, at average cost - Fossil fuel 22,560 47,291 Other 9,821 33,931 Other 6,240 10,387 ------------------ ---------------- Total current assets 310,187 249,607 ------------------ ---------------- Regulatory assets: Deferred income taxes 91 21,520 Other 12,450 20,141 ------------------ ---------------- Total regulatory assets 12,541 41,661 ------------------ ---------------- TOTAL ASSETS $1,867,141 $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 435,211 414,345 ------------------ ---------------- Total common stockholder's equity 555,244 534,378 Preferred stock not subject to mandatory redemption (Note 6) 80,000 80,000 Long-term debt (Note 8) 463,174 493,625 ------------------ ---------------- Total capitalization 1,098,418 1,108,003 ------------------ ---------------- Current liabilities: Current maturity of long-term debt (Note 8) 30,000 35,000 Intercompany notes payable 223,320 132,900 Accounts and wages payable 106,739 82,800 Accumulated deferred income taxes 19,639 22,621 Taxes accrued 13,899 32,145 Other 33,448 39,619 ------------------ ---------------- Total current liabilities 427,045 345,085 ------------------ ---------------- Commitments and Contingencies (Notes 2 and 11) Accumulated deferred income taxes 273,505 216,661 Accumulated deferred investment tax credits 12,965 32,169 Regulatory liability 34,898 34,004 Other deferred credits and liabilities 20,310 45,832 ------------------ ---------------- TOTAL CAPITAL AND LIABILITIES $1,867,141 $1,781,754 ================== ================
Notes to Financial Statements. -18-
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY STATEMENT OF INCOME (Thousands of Dollars) December 31, December 31, December 31, For the year ended 2000 1999 1998 ---- ---- ---- OPERATING REVENUES: Electric $717,127 $795,476 $721,918 Gas 176,771 132,646 125,506 ----------------- ---------------- ----------------- Total operating revenues 893,898 928,122 847,424 OPERATING EXPENSES: Operations Fuel and purchased power 370,434 314,208 230,085 Gas 110,335 73,352 69,350 Other 133,557 190,622 179,477 ----------------- ---------------- ----------------- 614,326 578,182 478,912 Maintenance 44,463 103,582 71,542 Depreciation and amortization 61,084 80,557 74,323 Income taxes 43,580 30,773 45,769 Other taxes 38,632 40,313 56,834 ----------------- ---------------- ----------------- Total operating expenses 802,085 833,407 727,380 Operating Income 91,813 94,715 120,044 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction - (8) 16 Miscellaneous, net 27,880 2,030 (955) ----------------- ---------------- ----------------- Total other income and deductions 27,880 2,022 (939) Income Before Interest Charges 119,693 96,737 119,105 INTEREST CHARGES: Interest 40,569 42,736 40,039 Allowance for borrowed funds used during construction (238) 21 (1,081) ----------------- ---------------- ----------------- Net interest charges 40,331 42,757 38,958 ----------------- ---------------- ----------------- NET INCOME 79,362 53,980 80,147 ----------------- ---------------- ----------------- Preferred Stock Dividends 3,882 3,833 3,745 ----------------- ---------------- ----------------- NET INCOME AFTER PREFERRED STOCK DIVIDENDS $75,480 $50,147 $76,402 ================= ================ =================
See Notes to Financial Statements. -19- CENTRAL ILLINOIS PUBLIC SERVICE COMPANY STATEMENT OF CASH FLOWS (Thousands of Dollars)
December 31, December 31, December 31, For the year ended 2000 1999 1998 ---- ---- ---- Cash Flows From Operating: Net income $79,362 $53,980 $80,147 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 61,084 80,557 74,323 Allowance for funds used during construction (238) 29 (1,097) Deferred income taxes, net 2,665 (18,562) (10,801) Deferred investment tax credits, net 524 (2,488) (5,712) Changes in assets and liabilities, net of transfer: Receivables, net (40,569) (31,362) (7,137) Materials and supplies (4,965) 5,616 (15,310) Accounts and wages payable 24,092 24,000 (30,562) Taxes accrued (18,246) 18,944 (2,668) Other, net (41,385) 34,948 42,161 -------------------- ------------------ -------------------- Net Cash Provided By Operating Activities 62,324 165,662 123,344 Cash Flows From Investing: Construction expenditures (41,321) (95,302) (68,848) Allowance for funds used during construction 238 (29) 1,097 -------------------- ------------------ -------------------- Net Cash Used In Investing Activities (41,083) (95,331) (67,751) Cash Flows From Financing: Dividends on common stock (54,614) (90,342) (72,285) Dividends on preferred stock (3,882) (3,833) (4,002) Redemptions - Short-term debt - (46,700) (18,266) Long-term debt (87,000) (60,000) (64,000) Issuances - Long-term debt 51,100 - 85,000 Intercompany notes payable 90,420 132,900 - -------------------- ------------------ -------------------- Net Cash Used In Financing Activities (3,976) (67,975) (73,553) Net Change In Cash And Cash Equivalents 17,265 2,356 (17,960) Cash And Cash Equivalents At Beginning Of Year 12,536 10,180 28,140 -------------------- ------------------ -------------------- Cash And Cash Equivalents At End Of Year $29,801 $12,536 $10,180 ======================================================================================================================= Cash paid during the periods: - ----------------------------------------------------------------------------------------------------------------------- Interest (net of amount capitalized) $41,946 $39,140 $40,269 Income taxes $57,938 $30,998 $61,953 - -----------------------------------------------------------------------------------------------------------------------
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 (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 1,000 shares of Generating Company common stock. The transaction also resulted in a deferred intercompany tax gain liability and related tax receivable from Generating Company in the amount of $219 million. See Note 2 - Regulatory Matters under Notes to Financial Statements for further information. See Notes to Financial Statements. -20- CENTRAL ILLINOIS PUBLIC SERVICE COMPANY STATEMENT OF RETAINED EARNINGS - ------------------------------ (Thousands of Dollars) - -------------------------------------------------------------------------------- Year Ended December 31, 2000 1999 1998 - -------------------------------------------------------------------------------- Balance at Beginning of Period $414,345 $455,337 $451,477 - -------------------------------------------------------------------------------- Add: Net income 79,362 53,980 80,147 - -------------------------------------------------------------------------------- 493,707 509,317 531,624 - -------------------------------------------------------------------------------- Deduct: Common stock dividends 54,614 90,342 72,285 Preferred stock dividends 3,882 4,630 4,002 - -------------------------------------------------------------------------------- 58,496 94,972 76,287 - -------------------------------------------------------------------------------- Balance at End of Period $435,211 $414,345 $455,337 - -------------------------------------------------------------------------------- SELECTED QUARTERLY INFORMATION (Unaudited) - -------------------------------- (Thousands of Dollars) - -------------------------------------------------------------------------------- Operating Operating Net Net Income Revenues Income (Loss) Income (Loss) After Quarter Ended (Loss) Preferred Stock Dividends - -------------------------------------------------------------------------------- March 31, 2000 $255,327 $ 35,734 $ 26,332 $ 25,339 March 31, 1999 207,772 24,709 14,315 13,347 June 30, 2000 195,119 22,185 19,904 19,067 June 30, 1999 221,929 29,981 20,680 19,763 September 30, 2000 219,248 30,994 31,828 30,801 September 30, 1999 279,327 53,845 43,283 42,326 December 31, 2000 (a) 224,204 2,900 1,298 273 December 31, 1999 (b) 219,094 (13,820) (24,298) (25,289) (a) The fourth quarter of 2000 included a nonrecurring charge related to the withdrawal from the Midwest ISO that reduced net income $5 million. (See Note 2 - Regulatory Matters under Notes to Financial Statements for further information.) (b) The fourth quarter of 1999 included a charge for coal supply contract terminations that reduced net income $31 million. (See Note 11 - Commitments and Contingencies under Notes to Financial Statements for further information.) Other changes in quarterly earnings are due to the effect of weather on sales and other factors that are characteristic of public utility operations. See Notes to Financial Statements. -21- CENTRAL ILLINOIS PUBLIC SERVICE COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 NOTE 1 - Summary of Significant Accounting Policies Basis of Presentation 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 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 325,000 electric and 175,000 gas customers in a 20,000 square-mile region of central and southern Illinois. The Registrant also has a 20% interest in Electric Energy, Inc. (EEI), which is accounted for under the equity method of accounting. EEI owns and/or 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 (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 Generating Company (the Transfer) (see Note 2 - Regulatory Matters for further discussion). Regulation In addition to the SEC, the Registrant is regulated by the Illinois Commerce Commission (ICC) and the FERC. The accounting policies of the Registrant conform to U.S. generally accepted accounting principles (GAAP). See Note 2 - Regulatory Matters for further information. Property and Plant The cost of additions to, and betterments of, units of property and plant is capitalized. Cost includes labor, material, applicable taxes and overheads. An allowance for funds used during construction is also added for the Registrant's regulated assets. Maintenance expenditures and the renewal of items not considered units of property are charged to income, as incurred. When units of depreciable property are retired, the original cost and removal cost, less salvage value, are charged to accumulated depreciation. Depreciation Depreciation is provided over the estimated lives of the various classes of depreciable property by applying composite rates on a straight-line basis. The provision for depreciation in 2000, 1999, and 1998 was approximately 3% of the average depreciable cost. Fuel and Gas Costs Prior to the Transfer, the cost of fuel for electric generation is reflected in base rates with no provision for changes to be made through a fuel adjustment clause. (See Note 2 - Regulatory Matters for further information.) Changes in gas costs are generally reflected in billings to gas customers through a purchased gas adjustment clause. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and temporary investments purchased with an original maturity of three months or less. -22- Income Taxes The Registrant is included in the consolidated federal income tax return filed by Ameren. Income taxes are allocated to the individual companies based on their respective taxable income or loss. Deferred tax assets and liabilities are recognized for the tax consequences of transactions that have been treated differently for financial reporting and tax return purposes, measured using statutory tax rates. Investment tax credits utilized in prior years were deferred and are being amortized over the useful lives of the related properties. Allowance for Funds Used During Construction Allowance for funds used during construction (AFC) is a utility industry accounting practice whereby the cost of borrowed funds and the cost of equity funds (preferred and common stockholders' equity) applicable to the Registrant's construction program are capitalized as a cost of construction. AFC does not represent a current source of cash funds. This accounting practice offsets the effect on earnings of the cost of financing current construction, and treats such financing costs in the same manner as construction charges for labor and materials. Under accepted ratemaking practice, cash recovery of AFC, as well as other construction costs, occurs when completed projects are placed in service and reflected in customer rates. The AFC rates used were 6% during 2000, 5% during 1999 and 6% during 1998. Unamortized Debt Discount, Premium and Expense Discount, premium, and expense associated with long-term debt are amortized over the lives of the related issues. Revenue The Registrant accrues an estimate of electric and gas revenues for service rendered, but unbilled, at the end of each accounting period. Energy Contracts The Emerging Issues Task Force of the Financial Accounting Standards Board (EITF) Issue 98-10, "Accounting for Energy Trading and Risk Management Activities" became effective on January 1, 1999. EITF 98-10 provides guidance on the accounting for energy contracts entered into for the purchase or sale of electricity, natural gas, capacity and transportation. The EITF reached a consensus in EITF 98-10 that sales and purchase activities being performed need to be classified as either trading or nontrading. Furthermore, transactions that are determined to be trading activities would be recognized on the balance sheet measured at fair value, with changes in fair market value included in earnings. Prior to the Transfer, AmerenEnergy, Inc., an energy marketing subsidiary of Ameren, entered into contracts for the sale and purchase of energy on behalf of the Registrant (see Note 2 - Regulatory Matters for further discussion of the Transfer). Virtually all of AmerenEnergy's transactions on behalf of the Registrant were considered nontrading activities and were accounted for using the accrual or settlement method, which represents industry practice. Subsequent to the Transfer, the Registrant no longer owns any generation assets and receives all of its power under the power supply agreement with AmerenEnergy Marketing Company (see Note 2 - Regulatory Matters), which is accounted for on the settlement basis. See Note 13 - Statement of Financial Accounting Standards No. 133 for information related to adoption of a new standard in 2001. Software Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" became effective on January 1, 1999. SOP 98-1 provides guidance on accounting for the costs of computer software developed or obtained for internal use. Under SOP 98-1, certain costs may be capitalized and amortized over some future period. Evaluation of Assets for Impairment Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" prescribes general standards for the recognition and measurement of impairment losses. The Registrant determines if long-lived assets are impaired by comparing their undiscounted expected future cash flows to their carrying amount. An impairment loss is recognized if the undiscounted expected future cash flows are less than the carrying amount of the asset. SFAS 121 also requires that regulatory assets which are no longer probable of recovery through future revenues be charged to earnings (see Note 2 - Regulatory Matters for further information). As of December 31, 2000, no impairment was identified. -23- Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. Such estimates and assumptions affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. NOTE 2 - Regulatory Matters Illinois Electric 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. Under the Law, retail direct access, which allows customers to choose their electric generation suppliers, will be phased in over several years. Access for commercial and industrial customers occurred over a period from October 1999 to December 2000, and access for residential customers will occur after May 1, 2002. As a requirement of the Law, in March 1999, the Registrant filed delivery service tariffs with the ICC. These tariffs would be used by electric customers who choose to purchase their power from alternate suppliers. In August 1999, the ICC issued an order approving the delivery services tariffs, with an allowed rate of return on equity of 10.45%. The Registrant and AmerenUE filed a joint petition for rehearing of that order requesting the ICC to alter its conclusions on a number of issues. In January 2000, the ICC issued an order resolving the issues set for rehearing. In December 2000, the Registrant and AmerenUE filed revised Illinois delivery service tariffs with the ICC. The purpose of the filing was to update financial information that was used to establish the initial rates and to propose new rates. Additionally, the filing establishes tariffs for residential customers who may choose to purchase their power from alternate suppliers beginning in May 2002. These tariffs are subject to ICC approval. The Registrant expects that the ICC will issue its decision with respect to the tariffs in early 2002. The Law included a 5% residential electric rate decrease for the Registrant's electric customers, effective August 1, 1998. This rate decrease reduced electric revenues by approximately $7 million in 1999. Under the Law, the Registrant was subject to an additional 5% residential electric rate decreases in 2000 and is subject to an additional 5% residential electric rate decrease in 2002, to the extent its rates exceed the Midwest utility average at that time. In 2000, the Registrant's Illinois electric rates were below the Midwest utility average. As a result of the Law, the Registrant filed a proposal with the ICC to eliminate the electric fuel adjustment clause for Illinois retail customers, thereby including historical levels of fuel costs in base rates. The ICC approved the Registrant's filing in early 1998. The Law also contains a provision requiring that one-half of excess earnings from the Illinois jurisdiction for the years 1998 through 2004 to be refunded to the Registrant's customers. Excess earnings are defined as the portion of the two-year average annual rate of return on common equity in excess of 1.5% of the two-year average of an Index, as defined in the Law. The Index is defined as the sum of the average for the twelve months ended September 30 of the average monthly yields of the 30-year U.S. Treasury bonds, plus prescribed percentages ranging from 4% to 7%. Filings must be made with the ICC on, or before, March 31 of each year 2000 through 2005. The Registrant did not record any estimated refunds to Illinois customers in 2000. 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 Generating Company in exchange for a promissory note from Generating Company in the principal amount of $552 million, $40 million of which is a current asset at December 31, 2000, and 1,000 shares of Generating Company common stock (the Transfer). The promissory note bears interest at 7 percent and has a term of five years payable based on a 10-year amortization. The transferred assets represent 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: -24- (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 ---------------------- In conjunction with the Transfer, an electric power supply agreement was entered into between Generating Company and its newly created nonregulated affiliate, AmerenEnergy Marketing Company (Marketing Company), also a wholly owned subsidiary of Resources Company. In addition, Marketing Company entered into an electric power supply agreement with the Registrant to supply it sufficient energy and capacity to meet its obligations as a public utility through December 31, 2004 (the Power Supply Agreement). 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. In turn, the Registrant will bill these customers at rates which approximate the costs the Registrant incurs for its capacity and energy supplied by Marketing Company. For the eight-month period ended December 31, 2000, $257 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 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 December 31, 2000, the Registrant's deferred tax liability and intercompany tax receivable was $211 million. Other provisions of the Law include (1) potential recovery of a portion of strandable costs, which represent costs which would not be recoverable in a restructured environment, through a transition charge collected from customers who choose another electric supplier; (2) a mechanism to securitize certain future revenues; and (3) a provision relieving the Registrant of the requirement to file electric rate cases or alternative regulatory plans, following the consummation of the Merger to reflect the effects of net merger savings. In August 1999, the Registrant filed a transmission system rate case with the FERC. This filing was primarily designed to implement rates, terms and conditions for transmission service for wholesale customers and those retail customers who choose other suppliers as allowed under the Law. In January 2000, the Registrant and other parties to the rate case entered into a settlement agreement resolving all issues pending before the FERC. In May 2000, the FERC approved the settlement and allowed the settlement rates to become effective as of the first quarter of 2000. -25- The provisions of the Law could also result in lower revenues, reduced profit margins and increased costs of capital and operations expense. At this time, the Registrant is unable to determine the impact of the Law on its future financial condition, results of operations or liquidity. Gas In February 1999, the ICC approved an $8 million annual rate increase for natural gas service. The increase became effective in February 1999. AmerenUE Transfer The Registrant and AmerenUE have filed requests with various regulatory agencies, including the ICC, Missouri Public Service Commission (MoPSC) and the SEC, seeking authorization to transfer AmerenUE's Illinois-based electric and natural gas businesses and certain of its Illinois-based distribution and transmission assets and personnel to the Registrant. The distribution and transmission assets and related liabilities were proposed to be transferred from AmerenUE to the Registrant at historical net book value. In March 2001, the Registrant decided it will no longer pursue this transfer and will be taking the necessary action to withdraw its pending requests for regulatory approvals. Midwest ISO In 1998, the Registrant joined a group of companies that originally supported the formation of the Midwest Independent System Operator (Midwest ISO). An ISO operates, but does not own, electric transmission systems and maintains system reliability and security, while facilitating wholesale and retail competition through the elimination of "pancaked" transmission rates. The Midwest ISO is regulated by the FERC. The FERC conditionally approved the formation of the Midwest ISO in September 1998. The ICC has authorized the Registrant to join the Midwest ISO. In December 1999, the FERC issued Order 2000 relating to Regional Transmission Organizations (RTOs) that would meet certain characteristics such as size and independence. RTOs, including ISOs, are entities that ensure comparable and non-discriminatory access to regional electric transmission systems. Order 2000 calls on all transmission owners to join RTOs. Following the announcements of Commonwealth Edison and Illinois Power of their intent to withdraw from the Midwest ISO and join the Alliance Regional Transmission Organization (Alliance RTO), the Registrant determined that the operational configuration of the Midwest ISO was unacceptable and announced its withdrawal in November 2000. The Registrant decided to withdraw to ensure the continued reliable and efficient operation of its transmission system. As a result of the Registrant's decision to withdraw from the Midwest ISO, in the fourth quarter of 2000, the Registrant recorded a pretax nonrecurring charge to earnings of $8 million ($5 million after income taxes). This charge relates to the Registrant's estimated obligation under the Midwest ISO agreement for costs incurred by the Midwest ISO, plus estimated exit costs. In January 2001, the Registrant announced that it had signed an agreement to join the Alliance RTO. Also, in January 2001, the FERC conditionally approved the formation, including the rate structure, of the Alliance RTO. In February 2001, in a proceeding before the FERC, the Alliance RTO and the Midwest ISO reached an agreement that enables the Registrant to withdraw from the Midwest ISO and to join the Alliance RTO. This settlement agreement remains subject to FERC approval. The Registrant's transfer of control and operation of its transmission assets to the Alliance RTO is also subject to ICC approval. At this time, the Registrant is unable to determine the impact that its withdrawal from the Midwest ISO and its participation in the Alliance RTO will have on its future financial condition, results of operations or liquidity. Regulatory Assets and Liabilities In accordance with SFAS 71, the Registrant has deferred certain costs pursuant to actions of its regulators, and is currently recovering such costs in electric rates charged to customers. -26- At December 31, the Registrant had recorded the following regulatory assets and regulatory liability: - ----------------------------------------------------------------------------- (In Millions) 2000 1999 - ----------------------------------------------------------------------------- Regulatory Assets: Income taxes $ - $22 Unamortized loss on reacquired debt 6 7 Other 6 13 - ----------------------------------------------------------------------------- Regulatory Assets $12 $42 - ----------------------------------------------------------------------------- Regulatory Liability: Income taxes $35 $34 - ----------------------------------------------------------------------------- Regulatory Liability $35 $34 - ----------------------------------------------------------------------------- Income Taxes: See Note 9 - Income Taxes. Unamortized Loss on Reacquired Debt: Represents losses related to refunded debt. These amounts are being amortized over the lives of the related new debt issues or the remaining lives of the old debt issues if no new debt was issued. The Registrant continually assesses the recoverability of its regulatory assets. Under current accounting standards, regulatory assets are written off to earnings when it is no longer probable that such amounts will be recovered through future revenues. NOTE 3 - Related Party Transactions The Registrant has transactions in the normal course of business with other Ameren subsidiaries. These transactions are primarily comprised of power purchases and sales, including power purchases derived under the Power Supply Agreement between the Registrant and Marketing Company, and services received or rendered. Intercompany receivables included in other accounts and notes receivable were approximately $8 million and $12 million, respectively, as of December 31, 2000 and 1999. Intercompany payables included in accounts and wages payable totaled approximately $75 million and $35 million, respectively, as of December 31, 2000 and 1999. In addition, the Registrant has the ability to borrow funds from Ameren or AmerenUE or invest funds through a regulated money pool agreement. At December 31, 2000 and 1999, the Registrant had outstanding intercompany borrowings of $197 million and $133 million, respectively, through the regulated money pool. See Note 7 - Short-Term Borrowings for further information. In conjunction with 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 December 31, 2000, the Registrant's deferred tax liability and intercompany tax receivable was $211 million. NOTE 4 - Targeted Separation Plan In July 1998, Ameren offered separation packages to employees whose positions were eliminated through a targeted separation plan (TSP). During the third quarter of 1998, a nonrecurring, pretax charge of $7 million was recorded, which reduced earnings $4 million, representing the Registrant's share of costs incurred to implement the TSP. NOTE 5 - Concentration of Risk Market Risk The Registrant is exposed to changes in market prices for natural gas 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. Since 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 Note 2 - Regulatory Matters under Notes to Financial Statements for further discussion). -27- Credit Risk Credit risk represents the loss that would be recognized if counterparties fail to perform as contracted. The Registrant's financial instruments subject to credit risk consist primarily of trade accounts receivables. The risk associated with trade receivables is mitigated by the large number of customers in a broad range of industry groups comprising the Registrant's customer base. No customer represents greater than 10 percent of the Registrant's accounts receivable. The Registrant's revenues are primarily derived from sales of electricity and natural gas to customers in Illinois. NOTE 6 - Preferred Stock At December 31, 2000 and 1999, the Registrant had 4.6 million shares of authorized preferred stock. There were 2 million shares of cumulative preferred and 2.6 million shares of preferred without par value (aggregate stated value not to exceed $65 million) authorized. Outstanding preferred stock is entitled to cumulative dividends and is redeemable at the prices shown in the following table: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Preferred Stock Not Subject to Mandatory Redemption: ( Dollars in Millions) - -------------------------------------------------------------------------------- Redemption Price December 31, (per share) 2000 1999 Par value $100 Series-- 4.00% Series - 150,000 shares $101.00 $15 $15 4.25% Series - 50,000 shares 102.00 5 5 4.90% Series - 75,000 shares 102.00 8 8 4.92% Series - 50,000 shares 103.50 5 5 5.16% Series - 50,000 shares 102.00 5 5 1993 Auction - 300,000 shares 100.00-note(a) 30 30 6.625% Series - 125,000 shares 100.00 12 12 - -------------------------------------------------------------------------------- Total Preferred Stock OUTSTANDING Not Subject to Mandatory Redemption $80 $80 - -------------------------------------------------------------------------------- (a) Dividend rates, and periods during which such rates apply, vary depending on the Registrant's selection of certain defined dividend period lengths. The average dividend rate during 2000 was 4.86%. - -------------------------------------------------------------------------------- NOTE 7 - Short-Term Borrowings Short-term borrowings of the Registrant consist of commercial paper (maturities generally within 1-45 days) and bank loans. At December 31, 2000 and 1999, the Registrant had no outstanding short-term borrowings. At December 31, 2000, the Registrant had committed bank lines of credit, 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. These lines of credit are renewable annually at various dates throughout the year. Also, the Registrant has the ability to borrow up to approximately $914 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. Interest is calculated at varying rates of interest depending on the composition of internal and external funds in the regulated money pool. At December 31, 2000, the Registrant had $197 million of intercompany borrowings outstanding and $727 million available through the regulated money pool. -28- NOTE 8 - Long-Term Debt Long-term debt outstanding at December 31, was: - -------------------------------------------------------------------------------- (In Millions) 2000 1999 - -------------------------------------------------------------------------------- First Mortgage Bonds - note (a) - -------------------------------------------------------------------------------- 6.00% Series Z paid in 2000 $ - $25 6.73% Series 1997-2 due 2001 20 20 6 3/4% Series Y due 2002 23 23 6 3/8% Series Z due 2003 40 40 6.49% Series 1995-1 due 2005 20 20 7.05% Series 1997-2 due 2006 20 20 7 1/2% Series X due 2007 50 50 7.61% Series 1997-2 due 2017 40 40 6.125% Series due 2028 60 60 Other 5.375% - 6.99% due 2001 through 2008 40 50 - -------------------------------------------------------------------------------- 313 348 - -------------------------------------------------------------------------------- Pollution Control Loan Obligations - -------------------------------------------------------------------------------- 1990 Series B 7.60% paid in 2000 - 32 1990 Series A 7.60% paid in 2000 - 20 2000 Series A due 2014 - note (b) 51 - 1993 Series C-1 due 2026 - note (b) 35 35 1993 Series C-2 5.70% due 2026 25 25 1993 Series A 6 3/8% due 2028 35 35 Other 4.13% - 5.90% due 2028 35 35 - -------------------------------------------------------------------------------- 181 182 - -------------------------------------------------------------------------------- Unamortized Discount and Premium on Debt (1) (1) - -------------------------------------------------------------------------------- Maturities Due Within One Year (30) (35) - -------------------------------------------------------------------------------- Total Long-Term Debt $463 $494 - -------------------------------------------------------------------------------- (a) At December 31, 2000, substantially all of the property and plant was mortgaged under, and subject to liens of, the respective indentures pursuant to which the bonds were issued. (b) Interest rates, and the periods during which such rates apply, vary depending on the Registrant's selection of certain defined rate modes. The average interest rates for the year 2000 are as follows: 1993 Series C-1 4.19% 2000 Series A 4.34% Maturities of long-term debt through 2005 are as follows: - -------------------------------------------------------------------------- (In Millions) Principal Amount - -------------------------------------------------------------------------- 2001 $30 2002 33 2003 45 2004 - 2005 20 - -------------------------------------------------------------------------- NOTE 9 - Income Taxes Total income tax expense for 2000 resulted in an effective tax rate of 36% on earnings before income taxes (36% in 1999 and 1998). Principal reasons such rates differ from the statutory federal rate: - -------------------------------------------------------------------------------- 2000 1999 1998 - -------------------------------------------------------------------------------- Statutory federal income tax rate 35% 35% 35% Increases (decreases) from: Depreciation differences (2) - (3) Amortization of investment tax credit (1) (3) (2) State income tax 4 5 5 Other - (1) 1 - -------------------------------------------------------------------------------- Effective income tax rate 36% 36% 36% - -------------------------------------------------------------------------------- -29- Income tax expense components: - -------------------------------------------------------------------------------- (In Millions) 2000 1999 1998 - -------------------------------------------------------------------------------- Taxes currently payable (principally federal): Included in operating expenses $ 42 $ 52 $ 60 - -------------------------------------------------------------------------------- $ 42 $ 52 $ 60 - -------------------------------------------------------------------------------- Deferred taxes (principally federal): Included in operating expenses-- Depreciation differences $(13) $ (7) $(10) Other 16 (12) (1) - -------------------------------------------------------------------------------- $ 3 $(19) $(11) - -------------------------------------------------------------------------------- Deferred investment tax credits, Amortization Included in operating expenses $ (1) $ (2) $ (3) - -------------------------------------------------------------------------------- Total income tax expense $ 44 $ 31 $ 46 - -------------------------------------------------------------------------------- In accordance with SFAS 109, "Accounting for Income Taxes," a regulatory asset, representing the probable recovery from customers of future income taxes, which is expected to occur when temporary differences reverse, was recorded along with a corresponding deferred tax liability. Also, a regulatory liability, recognizing the lower expected revenue resulting from reduced income taxes associated with amortizing accumulated deferred investment tax credits, was recorded. Investment tax credits have been deferred and will continue to be credited to income over the lives of the related property. The Registrant adjusts its deferred tax liabilities for changes enacted in tax laws or rates. Recognizing that regulators will likely reduce future revenues for deferred tax liabilities initially recorded at rates in excess of the current statutory rate, reductions in the deferred tax liability were credited to the regulatory liability. Temporary differences gave rise to the following deferred tax assets and deferred tax liabilities at December 31: - -------------------------------------------------------------------------------- (In Millions) 2000 1999 - -------------------------------------------------------------------------------- Accumulated Deferred Income Taxes: Accelerated depreciation $ 86 $216 Capitalized taxes and expenses 63 78 Regulatory liabilities, net (32) (29) Prepayments (25) (15) Deferred benefit costs (10) (11) Deferred intercompany tax gain 211 - - -------------------------------------------------------------------------------- Total net accumulated deferred income tax liabilities $293 $239 - -------------------------------------------------------------------------------- NOTE 10 - Retirement Benefits On January 1, 1999, the AmerenUE and the AmerenCIPS defined benefit pension plans combined to form the Ameren Retirement Plans (Ameren Plans). The Ameren Plans cover substantially all employees of the Registrant. Benefits are based on the employees' years of service and compensation. The Ameren Plans are funded in compliance with income tax regulations and federal funding requirements. The Registrant, along with other subsidiaries of Ameren, is a participant in the Ameren Plans and is responsible for its proportional share of the costs. The Registrant's share of the pension costs for 2000 and 1999 were $1 million and $6 million, respectively, of which approximately 23% and 20%, respectively, were charged to construction accounts. Pension costs for the AmerenCIPS' plans for the year 1998 were $9 million, of which approximately 19% were charged to construction accounts. -30- Components of Net Periodic Pension Benefit Cost: - ------------------------------------------------------------------------- (In Millions) 1998 - ------------------------------------------------------------------------- Service cost $ 8 Interest cost 17 Expected return on plan assets (22) Amortization of prior service cost 1 Special termination benefit charge 5 - ------------------------------------------------------------------------- Net periodic benefit cost $ 9 - ------------------------------------------------------------------------- In addition to providing pension benefits, the Registrant provides certain health care and life insurance benefits for retired employees. On January 1, 2000, the AmerenUE and AmerenCIPS postretirement medical benefit plans combined to form the Ameren Postretirement Benefit Plans (Ameren Postretirement Plans). The Ameren Postretirement Plans cover substantially all employees of the Registrant. The Ameren Postretirement Plans are funded in compliance with income tax regulations and federal funding requirements. The ICC allows the recovery of postretirement benefit costs in rates to the extent that such costs are funded. The Registrant, along with other subsidiaries of Ameren, is a participant in the Ameren Postretirement Plans and is responsible for its proportional share of the costs. The Registrant's share of the postretirement benefit costs for 2000 was $5 million, of which approximately 20% were charged to construction accounts. The Registrant's postretirement plan information for 1999 and 1998 is presented separately. The Registrant's postretirement benefit costs in 1999 and 1998 were $3 million and $6 million, respectively, of which 10% and 20%, respectively, were charged to construction accounts. Following is the plan information related to AmerenCIPS' plans as of December 31: Funded Status of Postretirement Benefit Plans: - ------------------------------------------------------------------------- (In Millions) 1999 - ------------------------------------------------------------------------- Change in benefit obligation Net benefit obligation at beginning of year $152 Service cost 3 Interest cost 9 Actuarial (gain)/loss (22) Benefits paid (4) - ------------------------------------------------------------------------- Net benefit obligation at end of year 138 Change in plan assets * Fair value of plan assets at beginning of year 128 Actual return on plan assets 10 Employer contributions 1 401(h) transfer - Benefits paid (4) - ------------------------------------------------------------------------- Fair value of plan assets at end of year 135 Funded status - deficiency 3 Unrecognized net actuarial gain 75 Unrecognized net transition obligation (71) - ------------------------------------------------------------------------- Postretirement benefit liability at December 31 $ 7 - ------------------------------------------------------------------------- * Plan assets consist principally of common stocks, bonds and money market instruments. -31- Components of Net Periodic Postretirement Benefit Cost: - -------------------------------------------------------------------------------- (In Millions) 1999 1998 - -------------------------------------------------------------------------------- Service cost $3 $3 Interest cost 9 10 Expected return on plan assets (9) (8) Amortization of: Transition obligation 6 5 Actuarial gain (6) (4) - -------------------------------------------------------------------------------- Net periodic benefit cost $3 $6 - -------------------------------------------------------------------------------- Assumptions for the Obligation Measurements: - -------------------------------------------------------------------- 1999 - -------------------------------------------------------------------- Discount rate at measurement date 7.75% Expected return on plan assets 8.5% Medical cost trend rate - initial - - ultimate 5.25% Ultimate medical cost trend rate expected in year 2000 - -------------------------------------------------------------------- NOTE 11 - Commitments and Contingencies The Registrant is engaged in a capital program under which expenditures averaging approximately $64 million, including AFC, are anticipated during each of the next five years. The Registrant has existing contracts with pipeline and natural gas suppliers to provide, transport and store natural gas for distribution. Gas-related contract cost commitments for 2001 through 2005 are estimated to total $105 million. Total delivered natural gas costs were $110 million for 2000, $73 million for 1999, and $69 million for 1998. In the fourth quarter of 1999, the Registrant and two of its coal suppliers executed agreements to terminate their existing coal supply contracts, effective December 31, 1999. Under these agreements, the Registrant has made termination payments to the suppliers totaling approximately $52 million. These termination payments were recorded as a nonrecurring charge in the fourth quarter of 1999, equivalent to $31 million, after income taxes. Total pretax fuel cost savings of $27 million were realized in 2000 by Ameren. The Registrant is involved in a number of remediation actions to clean up hazardous waste sites as required by federal and state law. Such statutes require that responsible parties fund remediation actions regardless of fault, legality of original disposal, or ownership of a disposal site. The Registrant has been identified by the federal or state governments as a potentially responsible party at several contaminated sites including one site that has been listed on the National Priorities List. The Registrant owns or is otherwise responsible for 13 manufactured gas plant (MGP) sites in Illinois. The ICC permits the recovery of remediation and litigation costs associated with former MGP sites located in Illinois from the Registrant's Illinois electric and natural gas utility customers through environmental adjustment clause rate riders. To be recoverable, such costs must be prudently and properly incurred and are subject to annual reconciliation review by the ICC. Through December 31, 2000, the total costs deferred, net of recoveries from insurers and environmental adjustment clause rate riders, was $6 million. In addition, the Registrant's operations, or that of its predecessor companies, involve the use, disposal and, in appropriate circumstances, the cleanup of substances regulated under environmental protection laws. Expenditures relating to such activities are not expected to have a material adverse effect on the Registrant's financial position, results of operation or liquidity. The International Union of Operating Engineers Local 148 and the International Brotherhood of Electrical Workers Local (IBEW) 702 filed unfair labor practice charges with the National Labor Relations Board (NLRB), relating to the legality of the 1993 lockout of both unions by AmerenCIPS. The NLRB issued complaints against the Registrant concerning its lockout. Both unions sought, among other things, back pay and other benefits for the period of the lockout. At that time, the Registrant estimated the amount of back pay and other benefits for both unions to be approximately $17 million. In August 1998, a three-member panel of the NLRB reversed the May 1996 decision of its administrative law judge and ruled in favor of the Registrant holding that the lockout was lawful. -32- In May 2000, the U.S. Court of Appeals for the District of Columbia Circuit issued a ruling upholding the NLRB's August 1998 decision. In December 2000, the U.S. Supreme Court denied the unions' request to review the U.S. Court of Appeals ruling. With this action by the U.S. Supreme Court, the unions have no further appeals available and the lawfulness of AmerenCIPS' 1993 lockout is upheld. The Registrant's union employees are represented by the IBEW and the International Union of Operating Engineers. These employees comprise approximately 66% of the Registrant's workforce. Labor agreements covering substantially all represented employees of the Registrant expired in 1999 and were renewed for a term expiring in 2002. In December 1996, a lawsuit was filed in the Circuit Court of Madison County, Illinois, alleging negligence on behalf of the Registrant and one of its subcontractors for injuries arising out of an elevator accident which occurred at the Registrant's' Newton Power Plant in November 1996. In October 2000, a settlement agreement was entered into between parties. The settlement is the subject of a confidentiality agreement; however, 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 operation or liquidity. Regulatory changes enacted and being considered at the federal and state levels continue to change the structure of the utility industry and utility regulation, as well as encourage increased competition. At this time, the Registrant is unable to predict the impact of these changes on the Registrant's financial condition, results of operations or liquidity. See Note 2 - Regulatory Matters for further information. The Registrant is involved in other legal and administrative proceedings before various courts and agencies with respect to matters arising in the ordinary course of business, some of which involve substantial amounts. The Registrant believes that the final disposition of these proceedings will not have a material adverse effect on its financial position, results of operations or liquidity. NOTE 12 - Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash and Temporary Investments/Short-Term Borrowings The carrying amounts approximate fair value because of the short-term maturity of these instruments. Preferred Stock The fair value is estimated based on the quoted market prices for the same or similar issues. Long-Term Debt The fair value is estimated based on the quoted market prices for same or similar issues or on the current rates offered to the Registrant for debt of comparable maturities. Derivative Financial Instruments Market prices used to determine fair value are based on management's estimates, which take into consideration factors like closing exchange prices, over-the-counter prices, time value of money and volatility factors. Carrying amounts and estimated fair values of the Registrant's financial instruments at December 31: 2000 1999 - -------------------------------------------------------------------------------- (In Millions) Carrying Fair Carrying Fair Amount Value Amount Value - -------------------------------------------------------------------------------- Preferred stock $ 80 $ 65 $ 80 $ 66 Long-term debt (including current portion) 493 504 529 528 - -------------------------------------------------------------------------------- NOTE 13 - Statement of Financial Accounting Standards No. 133 In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 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 -33- requires recognition of all derivatives as either assets or liabilities on the balance sheet measured at fair value. The intended use of the derivatives and their designation as either a fair value hedge, a cash flow hedge, or a foreign currency hedge will determine when the gains or losses on the derivatives are to be reported in earnings and when they are to be reported as a component of other comprehensive income in stockholder's equity. In June 1999, the FASB issued SFAS 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. The Registrant is adopting SFAS 133 in the first quarter of 2001. As of January 1, 2001, the adoption of SFAS 133 is not expected to have a material effect on the Registrant. However, the Derivatives Implementation Group (DIG), a committee of the FASB responsible for providing guidance on the implementation of SFAS 133, has not reached a conclusion regarding the appropriate accounting treatment of certain types of energy contracts under SFAS 133. The Registrant is unable to predict when this issue will ultimately be resolved and the impact the resolution will have on the Registrant's future financial position, results of operations or liquidity. Implementation of SFAS 133 will likely increase the volatility of the Registrant's earnings in future periods. NOTE 14 - Segment Information In 1998, the Registrant adopted SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." AmerenCIPS' business segments provide electric and gas service in portions of Illinois. The accounting policies of the segments are the same as those described in Note 1 - Summary of Significant Accounting Policies. Segment data includes a charge allocating costs of administrative support services to each of the segments. These costs are accumulated in a separate Ameren subsidiary, Ameren Services Company, which provides a variety of support services to the Registrant. The Registrant evaluates the performance of its segments and allocates resources to them, based on revenues and operating income. The table below presents information about the reported revenues and operating income of the Registrant for the years ended December 31: - ----------------------------------------------------------------------- (In Millions) Electric Gas Total - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- 2000 - ----------------------------------------------------------------------- Revenues $ 717 $ 177 $ 894 Operating income 77 15 92 - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- 1999 - ----------------------------------------------------------------------- Revenues $ 795 $ 133 $ 928 Operating income 86 9 95 - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- 1998 - ----------------------------------------------------------------------- Revenues $ 722 $ 125 $ 847 Operating income 115 5 120 - ----------------------------------------------------------------------- Specified items included in segment profit/loss for the year ended December 31: - ----------------------------------------------------------------------- (In Millions) Electric Gas Total - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- 2000 - ----------------------------------------------------------------------- Depreciation, depletion and amortization expense $ 53 $ 8 $ 61 - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- 1999 - ----------------------------------------------------------------------- Depreciation, depletion and amortization expense $ 73 $ 8 $ 81 - ----------------------------------------------------------------------- -34- - -------------------------------------------------------------------------------- 1998 - -------------------------------------------------------------------------------- Depreciation, depletion and amortization expense $ 66 $ 8 $ 74 - -------------------------------------------------------------------------------- Specified item related to segment assets as of December 31: - -------------------------------------------------------------------------------- (In Millions) Electric Gas Total - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2000 - -------------------------------------------------------------------------------- Expenditures for additions to long-lived assets $ 35 $ 6 $ 41 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1999 - -------------------------------------------------------------------------------- Expenditures for additions to long-lived assets $ 86 $ 9 $ 95 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1998 - -------------------------------------------------------------------------------- Expenditures for additions To long-lived assets $ 60 $ 9 $ 69 - -------------------------------------------------------------------------------- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Any information concerning directors required to be reported by this item is included under "Item (1): Election of Directors" in the AmerenCIPS' 2001 definitive proxy statement filed pursuant to Regulation 14A and is incorporated herein by reference. Information concerning executive officers required by this item is reported in Part I of this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION. Any information required to be reported by this item is included under "Executive Compensation" in AmerenCIPS' 2001 definitive proxy statement filed pursuant to Regulation 14A and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Any information required to be reported by this item is included under "Security Ownership" in AmerenCIPS' 2001 definitive proxy statement filed pursuant to Regulation 14A and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Any information required to be reported by this item is included under "Item (1): Election of Directors" in AmerenCIPS' 2001 definitive proxy statement filed pursuant to Regulation 14A and is incorporated herein by reference. -35- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as a part of this report: 1. Financial Statements and Financial Statement Schedule Covered by Report of Independent Accountants Pages Herein Report of Independent Accountants............................. 17 Balance Sheet - December 31, 2000 and 1999.................... 18 Statement of Income - Years 2000, 1999, and 1998.............. 19 Statement of Cash Flows - Years 2000, 1999, and 1998.......... 20 Statement of Retained Earnings - Years 2000, 1999, and 1998... 21 Notes to Financial Statements................................. 22 Valuation and Qualifying Accounts (Schedule II) Years 2000, 1999, and 1998.................................. 37 Schedules not included have been omitted because they are not applicable or the required data is shown in the aforementioned financial statements. 2. Exhibits: See EXHIBITS beginning on Page 39. (b) Reports on Form 8-K. The Registrant filed a report on Form 8-K dated January 11, 2001 reporting the recording of a nonrecurring charge in the fourth quarter of 2000 as a result of its decision to withdraw from the Midwest ISO. -36- CENTRAL ILLINOIS PUBLIC SERVICE COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Col.A Col.B Col.C Col.D Col.E ------ ------ ------ ----- ------ Additions --------------------------- (1) (2) Balance at Charged to Balance at beginning costs and Charged to end of Description of period expenses other accounts Deductions period ----------- ------------ ----------- ------------- ------------ -------- (Note) Year ended December 31, 2000 Reserves deducted in the balance sheet from assets to which they apply: Allowance for doubtful accounts $1,827,878 $3,100,000 $3,151,086 $1,776,792 ========== ========== ========== ========== Year ended December 31, 1999 Reserves deducted in the balance sheet from assets to which they apply: Allowance for doubtful accounts $1,714,232 $3,400,000 $3,286,354 $1,827,878 ========== ========== ========== ========== Year ended December 31, 1998 Reserves deducted in the balance sheet from assets to which they apply: Allowance for doubtful accounts $1,200,000 $4,267,000 $3,752,768 $1,714,232 ========== ========== ========== ==========
Note: Uncollectible accounts charged off, less recoveries. -37- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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) G. L. RAINWATER President and Chief Executive Officer Date March 30, 2001 By /s/ Steven R. Sullivan --------------- ------------------------------------------- (Steven R. Sullivan, Attorney-in-Fact) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signature Title /s/ G. L. Rainwater President, Chief Executive Officer and Director - ------------------------- G. L. RAINWATER (Principal Executive Officer) /s/ Jerre E. Birdsong Treasurer - ------------------------- JERRE E. BIRDSONG (Principal Financial Officer) /s/ Warner L. Baxter Vice President, Controller and Director - ------------------------- WARNER L. BAXTER (Principal Accounting Officer) /s/ Paul A. Agathen Director - ------------------------- PAUL A. AGATHEN /s/ Donald E. Brandt Director - ------------------------- DONALD E. BRANDT /s/ Charles W. Mueller Director - ------------------------- CHARLES W. MUELLER By /s/ Steven R. Sullivan March 30, 2001 --------------------------- (Steven R. Sullivan, Attorney-in Fact) -38- EXHIBITS Exhibits Filed Herewith Exhibit No. Description 12 - Statement re Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements. 23 - Consent of Independent Accountants. 24 - Powers of Attorney. -39- Exhibits Incorporated By Reference The following exhibits heretofore have been filed with the Securities and Exchange Commission (SEC) pursuant to requirements of the Acts administered by the Commission. Such exhibits are identified by the references following the listing of each such exhibit, and they are hereby incorporated herein by reference. Exhibit No. Description 2 - Agreement and Plan of Merger, dated as of August 11, 1995, by and among CIPSCO Incorporated (CIPSCO), Union Electric Company d/b/a AmerenUE (AmerenUE), Ameren Corporation (Ameren) and Arch Merger Inc. (June 30, 1995 Form 10-Q/A (Amendment No. 1), Exhibit 2(a)). 3.1(i) - Restated Articles of Incorporation of Central Illinois Public Service Company d/b/a AmerenCIPS' (the Company) (March 31, 1994 Form 10-Q, Exhibit 3(b)). 3.2(ii) - By-Laws of the Company as amended effective August 26, 1999 (September 30, 1999 Form 10-Q, Exhibit 3(ii)). 4.1 - Indenture of Mortgage or Deed of Trust dated October 1, 1941, from the Company to Continental Illinois National Bank and Trust Company of Chicago and Edmond B. Stofft, as Trustees (Exhibit 2.01 in File No. 2-60232). Supplemental Indentures dated, respectively September 1, 1947, January 1, 1949, February 1, 1952, September 1, 1952, June 1, 1954, February 1, 1958, January 1, 1959, May 1, 1963, May 1, 1964, June 1, 1965, May 1, 1967, April 1, 1970, April 1, 1971, September 1, 1971, May 1, 1972, December 1, 1973, March 1, 1974, April 1, 1975, October 1, 1976, November 1, 1976, October 1, 1978, August 1, 1979, February 1, 1980, February 1, 1986, May 15, 1992, July 1, 1992, September 15, 1992, April 1, 1993, and June 1, 1995 between the Company and the Trustees under the Indenture of Mortgage or Deed of Trust referred to above (Amended Exhibit 7(b) in File No. 2-7341; Second Amended Exhibit 7.03 in File No. 2-7795; Second Amended Exhibit 4.07 in File No. 2-9353; Amended Exhibit 4.05 in file No. 2-9802; Amended Exhibit 4.02 in File No. 2-10944; Amended Exhibit 2.02 in File No. 2-13866; Amended Exhibit 2.02 in File No. 2-14656; Amended Exhibit 2.02 in File No.2-21345; Amended Exhibit 2.02 in File No. 2-22326; Amended Exhibit 2.02 in File No. 2-23569; Amended Exhibit 2.02 in File No. 2-26284; Amended Exhibit 2.02 in File No. 2-36388; Amended Exhibit 2.02 in File No. 2-39587; Amended Exhibit 2.02 in File No. 2-41468; Amended Exhibit 2.02 in File No. 2-43912; Exhibit 2.03 in File No. 2-60232; Amended Exhibit 2.02 in File No. 2-50146; Amended Exhibit 2.02 in File No. 2-52886; Second Amended Exhibit 2.04 in File No. 2-57141; Amended Exhibit 2.04 in File No. 2-57557; Amended Exhibit 2.06 in File No. 2-62564; Exhibit 2.02(a) in File No. 2-65914; Amended Exhibit 2.02(a) in File No. 2-66380; and Amended Exhibit 4.02 in File No. 33-3188; Exhibit 4.02 to Form 8-K dated May 15, 1992; Exhibit 4.02 to Form 8-K dated July 1, 1992; Exhibit 4.02 to Form 8-K dated September 15, 1992; Exhibit 4.02 to Form 8-K dated March 30, 1993; Exhibit 4.03 to Form 8-K dated June 5, 1995; Exhibit 4.03 to Form 8-K dated March 15, 1997; Exhibit 4.03 to Form 8-K dated June 1, 1997; and Exhibit 4.02, Post-Effective Amendment No. 1 in File No. 333-18473.) 4.2 - Indenture dated as of December 1, 1998 from the Company to The Bank of New York relating to Senior Notes, 5.375% due 2008 and 6.125% due 2028 (Exhibit 4.03, Post-Effective Amendment No. 1 to File No. 333-18473). -40- Exhibit No. Description 10.1 - Form of Director's Retirement Income Plan (1990 Form 10-K, Exhibit 10.04). 10.2 - Form of Excess Benefit Plan (1994 Form 10-K, Exhibit 10.10). 10.3 - Amendment to Form of Excess Benefit Plan (1995 Form 10-K, Exhibit 10.07). 10.4 - Form of Special Executive Retirement Plan (1994 Form 10-K, Exhibit 10.11). 10.5 - Amendment to Form of Special Executive Retirement Plan (1995 Form 10-K, Exhibit 10.09). 10.6 - Ameren Long-Term Incentive Plan of 1998 (Ameren's 1998 Form 10-K, Exhibit 10.1). 10.7 - Ameren Change of Control Severance Plan (Ameren's 1998 Form 10-K, Exhibit 10.2). 10.8 - Ameren Deferred Compensation Plan for Members of the Ameren Leadership Team as amended and restated effective January 1, 2001 (Ameren's 2000 Form 10-K, Exhibit 10.1). 10.9 - Ameren Deferred Compensation Plan for Members of the Board of Directors (Ameren's 1998 Form 10-K, Exhibit 10.4). 10.10 - Ameren Executive Incentive Compensation Program Elective Deferral Provisions for Members of the Ameren Leadership Team as amended and restated effective January 1, 2001 (Ameren's 2000 Form 10-K, Exhibit 10.2). 10.11 - Asset Purchase Agreement between AmerenEnergy Generating Company (Generating Company) and the Company (June 30, 2000 Form 10-Q, Exhibit 10). 10.12 - Amended Electric Power Supply Agreement between Generating Company and AmerenEnergy Marketing Company (Marketing Co.) (File No. 333-56594, Exhibit 10.2). 10.13 - Electric Power Supply Agreement between Marketing Co. and the Company (File No. 333-56594, Exhibit 10.3). 10.14 - Amended Joint Dispatch Agreement among Generating Company, the Company and AmerenUE (File No.333-56594, Exhibit 10.4). -41- Exhibits Available Upon Request The following instruments defining the rights of holders of certain unregistered long-term debt of the Company have not been filed with the SEC but will be furnished upon request. - Loan Agreement dated January 1, 1993, between the Company and Illinois Development Finance Authority (IDFA) in connection with IDFA's $35,000,000, 6-3/8% Pollution Control Revenue Refunding Bonds (Central Illinois Public Service Company Project) 1993 Series A, due January 1, 2028. - Loan Agreement dated June 1, 1993, between the Company and IDFA in connection with IDFA's $17,500,000 Pollution Control Revenue Refunding Bonds, 1993 Series B-1 due June 1, 2028 and $17,500,000 Pollution Control Revenue Refunding Bonds, 1993 Series B-2 due June 1, 2028. - Loan Agreement dated August 15, 1993, between the Company and IDFA in connection with IDFA's $35,000,000 Pollution Control Revenue Refunding Bonds, 1993 Series C-1 due August 15, 2026 and $25,000,000 Pollution Control Revenue Refunding Bonds, 1993 Series C-2 due August 15, 2026. - Loan Agreement dated March 1, 2000, between the Company and IDFA in connection with the IDFA's $51,100,000 Pollution Control Revenue Refunding Bonds (AmerenCIPS Project) Series 2000A due March 1, 2014. Note: Reports of the Company on Forms 8-K, 10-Q and 10-K are on file with the SEC under File Number 1-3672. Reports of Ameren on Forms 8-K, 10-Q and 10-K are on file with the SEC under File Number 1-14756. -42- EX-12 2 0002.txt COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES CENTRAL ILLINOIS PUBLIC SERVICE COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS
Year Ended December 31, --------------------------------------------------------- 1996 1997 1998 1999 2000 Thousands of Dollars Except Ratios Net Income $77,393 $38,620 $80,147 $53,980 $79,362 Add- Extraordinary items net of tax - 24,853 - - - ---------- -------- -------- -------- -------- Net income from continuing operations 77,393 63,473 80,147 53,980 79,362 Taxes based on income 47,286 33,922 45,412 30,763 43,661 ---------- -------- -------- -------- -------- Net income before income taxes 124,679 97,395 125,559 84,743 123,023 ---------- -------- -------- -------- -------- Add- fixed charges: Interest on long term debt 31,409 32,271 37,260 38,223 28,935 Other interest 4,636 2,875 1,647 3,373 8,497 Amortization of net debt premium, discount, expenses and losses 1,709 1,643 1,132 1,139 2,880 ---------- -------- -------- -------- -------- Total fixed charges 37,754 36,789 40,039 42,735 40,312 ---------- -------- -------- -------- -------- Earnings available for fixed charges 162,433 134,184 165,598 127,478 163,335 ========== ======== ======== ======== ======== Ratio of earnings to fixed charges 4.30 3.64 4.13 2.98 4.05 ========== ======== ======== ======== ======== Earnings required for preferred dividends: Preferred stock dividends 3,721 3,715 3,745 3,833 3,882 Adjustment to pre-tax basis 2,273 1,985 2,122 2,185 2,135 ---------- -------- -------- -------- -------- 5,994 5,700 5,867 6,018 6,017 Fixed charges plus preferred stock dividend requirements 43,748 42,489 45,906 48,753 46,329 ========== ======== ======== ======== ======== Ratio of earnings to fixed charges plus preferred stock dividend requirements 3.71 3.15 3.60 2.61 3.52 ========== ======== ======== ======== ========
EX-23 3 0003.txt CONSENT OF INDEPENDENT ACCOUNTS CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 33-59674 and No. 33-45506) of Central Illinois Public Service Company of our report dated February 5, 2001 relating to the financial statements and financial statement schedule, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP St. Louis, Missouri March 30, 2001 EX-24 4 0004.txt POWER OF ATTORNEY POWER OF ATTORNEY WHEREAS, CENTRAL ILLINOIS PUBLIC SERVICE COMPANY, an Illinois corporation (herein referred to as the "Company"), is required to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, its annual report on Form 10-K for the year ended December 31, 2000; and WHEREAS, each of the below undersigned holds the office or offices in the Company set opposite his name; NOW, THEREFORE, each of the undersigned hereby constitutes and appoints Gary L. Rainwater and/or Steven R. Sullivan the true and lawful attorneys-in-fact of the undersigned, for and in the name, place and stead of the undersigned, to affix the name of the undersigned to said Form 10-K and any amendments thereto, and, for the performance of the same acts, each with power to appoint in their place and stead and as their substitute, one or more attorneys-in-fact for the undersigned, with full power of revocation; hereby ratifying and confirming all that said attorneys-in-fact may do by virtue hereof. IN WITNESS WHEREOF, the undersigned have hereunto set their hands this 8th day of February 2001: Gary L. Rainwater, President, Chief Executive Officer and Director (Principal Executive Officer) /s/ Gary L. Rainwater ------------------------------ Paul A. Agathen, Director /s/ Paul A. Agathen ------------------------------ Warner L. Baxter, Vice President, Controller and Director (Principal Accounting Officer) /s/ Warner L. Baxter ------------------------------ Donald E. Brandt, Director /s/ Donald E. Brandt ------------------------------ Charles W. Mueller, Director /s/ Charles W. Mueller ------------------------------ Jerre E. Birdsong, Treasurer (Principal Financial Officer) /s/ Jerre E. Birdsong ------------------------------ STATE OF MISSOURI ) ) SS. CITY OF ST. LOUIS ) On this 8th day of February, 2001, before me, the undersigned Notary Public in and for said State, personally appeared the above-named officers and directors of Central Illinois Public Service Company, known to me to be the persons described in and who executed the foregoing power of attorney and acknowledged to me that they executed the same as their free act and deed for the purposes therein stated. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal. /s/ K. A. Bell ------------------------------------------- K. A. BELL Notary Public - Notary Seal STATE OF MISSOURI St. Louis County My Commission Expires: October 13, 2002 -----END PRIVACY-ENHANCED MESSAGE-----