DERIVATIVE FINANCIAL INSTRUMENTS

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


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


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


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

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

The following table presents open gross commodity contract volumes by commodity type as of September 30, 2013, and December 31, 2012:



	Quantity (in millions, except as indicated)
Commodity	Accrual & NPNS Contracts^(a)		Other Derivatives^(b)		Derivatives That Qualify for Regulatory Deferral^(c)
	2013	2012	2013	2012	2013	2012
Coal (in tons)
Ameren Missouri & Ameren	81	96	(d)	(d)	(d)	(d)
Fuel oils (in gallons)^(e)
Ameren Missouri & Ameren	(d)	(d)	(d)	(d)	60	70
Natural gas (in mmbtu)
Ameren Missouri	2	4	—	—	29	19
Ameren Illinois	6	16	(d)	(d)	115	128
Ameren	8	20	—	—	144	147
Power (in megawatthours)
Ameren Missouri	3	3	1	2	5	9
Ameren Illinois	15	21	(d)	(d)	11	14
Ameren	18	24	1	2	16	23
Renewable energy credits^(f)
Ameren Missouri	3	3	(d)	(d)	(d)	(d)
Ameren Illinois	11	12	(d)	(d)	(d)	(d)
Ameren	14	15	(d)	(d)	(d)	(d)
Uranium (pounds in thousands)
Ameren Missouri & Ameren	4,516	5,142	(d)	(d)	996	446


(a)	Accrual contracts include commodity contracts that do not qualify as derivatives. As of September 30, 2013, these contracts ran through December 2017, March 2015, September 2024, May 2032, and October 2024 for coal, natural gas, power, renewable energy credits, and uranium, respectively.


(b)	As of September 30, 2013, these contracts ran through December 2014 for power.


(c)	As of September 30, 2013, these contracts ran through October 2015, October 2019, May 2032, and October 2016 for fuel oils, natural gas, power, and uranium, respectively.


(d)	Not applicable.


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


(f)	A renewable energy credit is created for every one megawatthour of renewable energy generated. The Ameren Companies’ contracts include renewable energy credits from solar and wind-generated power.

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

If we determine that a contract meets the definition of a derivative and is not eligible for the NPNS exception, we review the contract to determine if it qualifies for hedge accounting. We also consider whether gains or losses resulting from such derivatives qualify for regulatory deferral. Contracts that qualify for cash flow hedge accounting are recorded at fair value with changes in fair value charged or credited to accumulated OCI in the period in which the change occurs, to the extent the hedge is effective. To the extent the hedge is ineffective, the related changes in fair value are charged or credited to the statement of income or the statement of income and comprehensive income in the period in which the change occurs. When the contract is settled or delivered, the net gain or loss is recorded in the statement of income or the statement of income and comprehensive income. Currently, we have not elected cash flow hedge accounting for any of our derivative contracts.

Derivative contracts that qualify for regulatory deferral are recorded at fair value, with changes in fair value recorded as regulatory assets or regulatory liabilities in the period in which the change occurs. Ameren Missouri and Ameren Illinois believe derivative gains and losses deferred as regulatory assets and regulatory liabilities are probable of recovery or refund through future rates charged to customers. Regulatory assets and regulatory liabilities are amortized to operating income as related losses and gains are reflected in rates charged to customers. Therefore, gains and losses on these derivatives have no effect on operating income.

Certain derivative contracts are entered into on a regular basis as part of our risk management program but do not qualify for, or we do not choose to elect, the NPNS exception, hedge accounting, or regulatory deferral accounting. Such contracts are recorded at fair value, with changes in fair value charged or credited to the statement of income or the statement of income and comprehensive income in the period in which the change occurs.

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

The following table presents the carrying value and balance sheet location of all derivative instruments as of September 30, 2013, and December 31, 2012:



	Balance Sheet Location		Ameren		Ameren Missouri		Ameren Illinois
2013
Derivative assets not designated as hedging instruments^(a)
Commodity contracts:
Fuel oils	Other current assets	$	6	$	6	$	—
	Other assets		2		2		—
Natural gas	Other current assets		1		1		—
Power	Other current assets		30		30		—
	Other assets		1		1		—
Uranium	Other current assets		1		1		—
	Total assets	$	41	$	41	$	—
Derivative liabilities not designated as hedging instruments^(a)
Commodity contracts:
Fuel oils	MTM derivative liabilities	$	3	$	(b)	$	—
	Other current liabilities		—		3		—
	Other deferred credits and liabilities		1		1		—
Natural gas	MTM derivative liabilities		45		(b)		38
	Other current liabilities		—		7		—
	Other deferred credits and liabilities		30		6		24
Power	MTM derivative liabilities		13		(b)		10
	Other current liabilities		—		3		—
	Other deferred credits and liabilities		84		—		84
Uranium	MTM derivative liabilities		4		(b)		—
	Other current liabilities		—		4		—
	Other deferred credits and liabilities		2		2		—
	Total liabilities	$	182	$	26	$	156
2012
Derivative assets not designated as hedging instruments^(a)
Commodity contracts:
Fuel oils	Other current assets	$	8	$	8	$	—
	Other assets		4		4		—
Natural gas	Other current assets		1		—		1
	Other assets		1		1		—
Power	Other current assets		14		14		—
	Other assets		1		1		—
	Total assets	$	29	$	28	$	1
Derivative liabilities not designated as hedging instruments^(a)
Commodity contracts:
Fuel oils	MTM derivative liabilities	$	2	$	(b)	$	—
	Other current liabilities		—		2		—
	Other deferred credits and liabilities		2		2		—
Natural gas	MTM derivative liabilities		64		(b)		56
	Other current liabilities		—		8		—
	Other deferred credits and liabilities		45		7		38
Power	MTM derivative liabilities		25		(b)		21
	Other current liabilities		—		4		—
	Other deferred credits and liabilities		90		—		90
Uranium	MTM derivative liabilities		1		(b)		—
	Other current liabilities		—		1		—
	Other deferred credits and liabilities		1		1		—
	Total liabilities	$	230	$	25	$	205


(a)	Includes derivatives subject to regulatory deferral.


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

The following table presents the cumulative amount of pretax net gains (losses) on all derivative instruments deferred in regulatory assets or regulatory liabilities as of September 30, 2013, and December 31, 2012:



	Ameren			Ameren Missouri			Ameren Illinois
2013
Cumulative gains (losses) deferred in regulatory liabilities or assets:
Fuel oils derivative contracts^(a)	$	1		$	1		$	—
Natural gas derivative contracts^(b)	(74		)	(12		)	(62		)
Power derivative contracts^(c)	(67		)	27			(94		)
Uranium derivative contracts^(d)	(5		)	(5		)	—
2012
Cumulative gains (losses) deferred in regulatory liabilities or assets:
Fuel oils derivative contracts^(a)	$	4		$	4		$	—
Natural gas derivative contracts^(b)	(107		)	(14		)	(93		)
Power derivative contracts^(c)	(99		)	12			(111		)
Uranium derivative contracts^(d)	(2		)	(2		)	—

(a)

Represents net gains (losses) on fuel oils derivative contracts at Ameren Missouri. These contracts are a partial hedge of Ameren Missouri’s transportation costs for coal through October 2015 as of September 30, 2013. Current gains deferred as regulatory liabilities include $3 million and $3 million at Ameren and Ameren Missouri, respectively, as of September 30, 2013. Current losses deferred as regulatory assets include $1 million and $1 million at Ameren and Ameren Missouri, respectively, as of September 30, 2013.

(b)

Represents net losses associated with natural gas derivative contracts. These contracts are a partial hedge of natural gas requirements through October 2019 at Ameren and Ameren Missouri and through March 2017 at Ameren Illinois as of September 30, 2013. Current gains deferred as regulatory liabilities include $1 million, and $1 million at Ameren and Ameren Missouri, respectively, as of September 30, 2013. Current losses deferred as regulatory assets include $45 million, $7 million, and $38 million at Ameren, Ameren Missouri and Ameren Illinois, respectively, as of September 30, 2013.

(c)

Represents net gains (losses) associated with power derivative contracts. These contracts are a partial hedge of power price requirements through May 2032 at Ameren and Ameren Illinois and through December 2015 at Ameren Missouri as of September 30, 2013. Current gains deferred as regulatory liabilities include $29 million and $29 million at Ameren and Ameren Missouri, respectively, as of September 30, 2013. Current losses deferred as regulatory assets include $13 million, $3 million, and $10 million at Ameren, Ameren Missouri and Ameren Illinois, respectively, as of September 30, 2013.

(d)

Represents net losses on uranium derivative contracts at Ameren Missouri. These contracts are a partial hedge of Ameren Missouri’s uranium requirements through October 2016 as of September 30, 2013. Current gains deferred as regulatory liabilities included $1 million and $1 million at Ameren and Ameren Missouri, respectively, as of September 30, 2013. Current losses deferred as regulatory assets include $4 million and $4 million at Ameren and Ameren Missouri, respectively, as of September 30, 2013.

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

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

Although Ameren had not previously elected to offset fair value amounts and collateral for derivative instruments executed with the same counterparty under the same master netting arrangement, authoritative accounting guidance, effective in the first quarter 2013, requires those amounts eligible to be offset to be presented both at the gross and net amounts. The following table provides the recognized gross derivative balances and the net amounts of those derivatives subject to an enforceable master netting arrangement or similar agreement as of September 30, 2013, and December 31, 2012:



			Gross Amounts Not Offset in the Balance Sheet
	Gross Amounts Recognized in the Balance Sheet		Derivative Instruments		Cash Collateral Received/Posted^(a)		Net Amount
2013
Commodity contracts eligible to be offset:
Assets:
Ameren	$	41	$	11	$	—	$	30
Ameren Missouri	41		11		—		30
Ameren Illinois	—		—		—		—
Liabilities:
Ameren	$	182	$	11	$	32	$	139
Ameren Missouri	26		11		8		7
Ameren Illinois	156		—		24		132
2012
Commodity contracts eligible to be offset:
Assets:
Ameren	$	29	$	10	$	—	$	19
Ameren Missouri	28		9		—		19
Ameren Illinois	1		1		—		—
Liabilities:
Ameren	$	230	$	10	$	65	$	155
Ameren Missouri	25		9		7		9
Ameren Illinois	205		1		58		146


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

Concentrations of Credit Risk

In determining our concentrations of credit risk related to derivative instruments, we review our individual counterparties and categorize each counterparty into groupings according to the primary business in which each engages. The following table presents the maximum exposure, as of September 30, 2013, and December 31, 2012, if counterparty groups were to fail completely to perform on contracts by grouping. The maximum exposure is based on the gross fair value of financial instruments, including accrual and NPNS contracts, which excludes collateral held, and does not consider the legally binding right to net transactions based on master trading and netting agreements.



	Commodity Marketing Companies		Electric Utilities		Financial Companies		Municipalities/ Cooperatives		Total
2013
Ameren Missouri	$	1	$	1	$	7	$	2	$	11
Ameren Illinois	—		—		—		—		—
Ameren	$	1	$	1	$	7	$	2	$	11
2012
Ameren Missouri	$	2	$	3	$	14	$	3	$	22
Ameren Illinois	—		—		1		—		1
Ameren	$	2	$	3	$	15	$	3	$	23

The potential loss on counterparty exposures is reduced by the application of master trading and netting agreements and collateral held to the extent of reducing the exposure to zero. Collateral includes both cash and other collateral held. The Ameren Companies held no cash from counterparties based on the contractual rights under the agreements to seek collateral and the maximum exposure as calculated under the individual master trading and netting agreements as of September 30, 2013, and December 31, 2012. As of September 30, 2013, no other collateral used to reduce exposure was held by the Ameren Companies. As of December 31, 2012, other collateral used to reduce exposure consisted of letters of credit of $1 million held by Ameren and Ameren Missouri.

The following table presents the potential loss after consideration of collateral and application of master trading and netting agreements as of September 30, 2013, and December 31, 2012:



	Commodity Marketing Companies		Electric Utilities		Financial Companies		Municipalities/ Cooperatives		Total
2013
Ameren Missouri	$	1	$	—	$	2	$	2	$	5
Ameren Illinois	—		—		—		—		—
Ameren	$	1	$	—	$	2	$	2	$	5
2012
Ameren Missouri	$	1	$	1	$	10	$	3	$	15
Ameren Illinois	—		—		—		—		—
Ameren	$	1	$	1	$	10	$	3	$	15

Derivative Instruments with Credit Risk-Related Contingent Features

Our commodity contracts contain collateral provisions tied to the Ameren Companies’ credit ratings. If we were to experience an adverse change in our credit ratings, or if a counterparty with reasonable grounds for uncertainty regarding performance of an obligation requested adequate assurance of performance, additional collateral postings might be required. The following table presents, as of September 30, 2013, and December 31, 2012, the aggregate fair value of all derivative instruments with credit risk-related contingent features in a gross liability position, the cash collateral posted, and the aggregate amount of additional collateral that could be required to be posted with counterparties. The additional collateral required is the net liability position allowed under the master trading and netting agreements, assuming (1) the credit risk-related contingent features underlying these agreements were triggered on September 30, 2013, or December 31, 2012, respectively, and (2) those counterparties with rights to do so requested collateral:



	Aggregate Fair Value of Derivative Liabilities^(a)		Cash Collateral Posted		Potential Aggregate Amount of Additional Collateral Required^(b)
2013
Ameren Missouri	$	69	$	1	$	63
Ameren Illinois	101		24		70
Ameren	$	170	$	25	$	133
2012
Ameren Missouri	$	78	$	3	$	71
Ameren Illinois	148		58		84
Ameren	$	226	$	61	$	155


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


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

Derivatives that Qualify for Regulatory Deferral

The following table represents the net change in market value for derivatives that qualify for regulatory deferral for the three and nine months ended September 30, 2013, and 2012:



		Gain (Loss) Recognized in Regulatory Liabilities or Regulatory Assets
		Three Months						Nine Months
		2013			2012			2013			2012
Ameren	Fuel oils	$	1		$	5		$	(3	)	$	(9	)
	Natural gas	9			46			33			74
	Power^(a)	(24		)	(6		)	32			(169		)
	Uranium	(2		)	(1		)	(3		)	(1		)
	Total	$	(16	)	$	44		$	59		$	(105	)
Ameren Missouri	Fuel oils	$	1		$	5		$	(3	)	$	(9	)
	Natural gas	—			6			2			9
	Power	(10		)	(6		)	15			(3		)
	Uranium	(2		)	(1		)	(3		)	(1		)
	Total	$	(11	)	$	4		$	11		$	(4	)
Ameren Illinois	Natural gas	$	9		$	40		$	31		$	65
	Power	(14		)	56			17			(25		)
	Total	$	(5	)	$	96		$	48		$	40


(a)	Amounts include intercompany eliminations.