FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We use various methods to determine fair value, including market, income, and cost approaches. With these approaches, we adopt certain assumptions that market participants would use in pricing the asset or liability, including assumptions about market risk or the risks inherent in the inputs to the valuation. Inputs to valuation can be readily observable, market-corroborated, or unobservable. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Authoritative accounting guidance established a fair value hierarchy that prioritizes the inputs used to measure fair value.

All financial assets and liabilities carried at fair value are classified and disclosed in one of three hierarchy levels. See Note 8 – Fair Value Measurements under Part II, Item 8, of the Form 10-K for information related to hierarchy levels. We perform an analysis each quarter to determine the appropriate hierarchy level of the assets and liabilities subject to fair value measurements. Financial assets and liabilities are classified in their entirety according to the lowest level of input that is significant to the fair value measurement. All assets and liabilities whose fair value measurement is based on significant unobservable inputs are classified as Level 3.

We consider nonperformance risk in our valuation of derivative instruments by analyzing the credit standing of our counterparties and considering any counterparty credit enhancements (e.g., collateral). The guidance also requires that the fair value measurement of liabilities reflect the nonperformance risk of the reporting entity, as applicable. Therefore, we have factored the impact of our credit standing, as well as any potential credit enhancements, into the fair value measurement of both derivative assets and derivative liabilities. Included in our valuation, and based on current market conditions, is a valuation adjustment for counterparty default derived from market data such as the price of credit default swaps, bond yields, and credit ratings. No gains or losses related to valuation adjustments for counterparty default risk were recorded at Ameren, Ameren Missouri, or Ameren Illinois in the three months ended March 31, 2018 or 2017. At March 31, 2018, and December 31, 2017, the counterparty default risk valuation adjustment related to derivative contracts was immaterial for Ameren, Ameren Missouri, and Ameren Illinois.

The following table sets forth, by level within the fair value hierarchy, our assets and liabilities measured at fair value on a recurring basis as of March 31, 2018:



		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
Assets:
Ameren	Derivative assets – commodity contracts^(a):
	Fuel oils	$	6	$	—	$	2	$	8
	Natural gas	—		1		—		1
	Power	—		—		5		5
	Total derivative assets – commodity contracts	$	6	$	1	$	7	$	14
	Nuclear decommissioning trust fund:
	Equity securities:
	U.S. large capitalization	$	464	$	—	$	—	$	464
	Debt securities:
	U.S. treasury and agency securities	—		118		—		118
	Corporate bonds	—		80		—		80
	Other	—		32		—		32
	Total nuclear decommissioning trust fund	$	464	$	230	$	—	$	694	^(b)
	Total Ameren	$	470	$	231	$	7	$	708
Ameren Missouri	Derivative assets – commodity contracts^(a):
	Fuel oils	$	6	$	—	$	2	$	8
	Power	—		—		5		5
	Total derivative assets – commodity contracts	$	6	$	—	$	7	$	13
	Nuclear decommissioning trust fund:
	Equity securities:
	U.S. large capitalization	$	464	$	—	$	—	$	464
	Debt securities:
	U.S. treasury and agency securities	—		118		—		118
	Corporate bonds	—		80		—		80
	Other	—		32		—		32
	Total nuclear decommissioning trust fund	$	464	$	230	$	—	$	694	^(b)
	Total Ameren Missouri	$	470	$	230	$	7	$	707
Ameren Illinois	Derivative assets – commodity contracts^(a):
	Natural gas	$	—	$	1	$	—	$	1
Liabilities:
Ameren	Derivative liabilities – commodity contracts^(a):
	Natural gas	$	—	$	32	$	6	$	38
	Power	—		—		192		192
	Total Ameren	$	—	$	32	$	198	$	230
Ameren Missouri	Derivative liabilities – commodity contracts^(a):
	Natural gas	$	—	$	9	$	—	$	9
	Power	—		—		1		1
	Total Ameren Missouri	$	—	$	9	$	1	$	10
Ameren Illinois	Derivative liabilities – commodity contracts^(a):
	Natural gas	$	—	$	23	$	6	$	29
	Power	—		—		191		191
	Total Ameren Illinois	$	—	$	23	$	197	$	220


(a)	The derivative asset and liability balances are presented net of counterparty credit considerations.


(b)	Balance excludes $4 million of cash and cash equivalents, receivables, payables, and accrued income, net.

The following table sets forth, by level within the fair value hierarchy, our assets and liabilities measured at fair value on a recurring basis as of December 31, 2017:



		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
Assets:
Ameren	Derivative assets – commodity contracts^(a):
	Fuel oils	$	4	$	—	$	3	$	7
	Natural gas	—		—		1		1
	Power	—		1		8		9
	Total derivative assets – commodity contracts	$	4	$	1	$	12	$	17
	Nuclear decommissioning trust fund:
	Equity securities:
	U.S. large capitalization	$	468	$	—	$	—	$	468
	Debt securities:
	U.S. treasury and agency securities	—		125		—		125
	Corporate bonds	—		82		—		82
	Other	—		25		—		25
	Total nuclear decommissioning trust fund	$	468	$	232	$	—	$	700	^(b)
	Total Ameren	$	472	$	233	$	12	$	717
Ameren Missouri	Derivative assets – commodity contracts^(a):
	Fuel oils	$	4	$	—	$	3	$	7
	Natural gas	—		—		1		1
	Power	—		1		8		9
	Total derivative assets – commodity contracts	$	4	$	1	$	12	$	17
	Nuclear decommissioning trust fund:
	Equity securities:
	U.S. large capitalization	$	468	$	—	$	—	$	468
	Debt securities:
	U.S. treasury and agency securities	—		125		—		125
	Corporate bonds	—		82		—		82
	Other	—		25		—		25
	Total nuclear decommissioning trust fund	$	468	$	232	$	—	$	700	^(b)
	Total Ameren Missouri	$	472	$	233	$	12	$	717
Liabilities:
Ameren	Derivative liabilities – commodity contracts^(a):
	Natural gas	$	1	$	25	$	4	$	30
	Power	—		—		196		196
	Total Ameren	$	1	$	25	$	200	$	226
Ameren Missouri	Derivative liabilities – commodity contracts^(a):
	Natural gas	$	—	$	7	$	1	$	8
	Power	—		—		1		1
	Total Ameren Missouri	$	—	$	7	$	2	$	9
Ameren Illinois	Derivative liabilities – commodity contracts^(a):
	Natural gas	$	1	$	18	$	3	$	22
	Power	—		—		195		195
	Total Ameren Illinois	$	1	$	18	$	198	$	217


(a)	The derivative asset and liability balances are presented net of counterparty credit considerations.


(b)	Balance excludes $4 million of cash and cash equivalents, receivables, payables, and accrued income, net.

All costs related to financial assets and liabilities classified as Level 3 in the fair value hierarchy are expected to be recoverable through customer rates; therefore, there is no impact to net income resulting from changes in the fair value of these instruments. For the three months ended March 31, 2018 and 2017, the balances and changes in the fair value of Level 3 financial assets and liabilities associated with fuel oils and natural gas were immaterial.

The following table summarizes the changes in the fair value of power financial assets and liabilities classified as Level 3 in the fair value hierarchy:



		Net derivative commodity contracts
		Ameren Missouri			Ameren Illinois			Ameren
For the three months ended March 31, 2018
Beginning balance at January 1, 2018	$	7		$	(195	)	$	(188	)
Realized and unrealized gains (losses) included in regulatory assets/liabilities		(2	)		1			(1	)
Settlements		(1	)		3			2
Ending balance at March 31, 2018	$	4		$	(191	)	$	(187	)
Change in unrealized gains (losses) related to assets/liabilities held at March 31, 2018	$	(1	)	$	1		$	—
For the three months ended March 31, 2017
Beginning balance at January 1, 2017	$	7		$	(185	)	$	(178	)
Realized and unrealized gains (losses) included in regulatory assets/liabilities		—			(10	)		(10	)
Settlements		(3	)		1			(2	)
Ending balance at March 31, 2017	$	4		$	(194	)	$	(190	)
Change in unrealized gains (losses) related to assets/liabilities held at March 31, 2017	$	—		$	(11	)	$	(11	)

Transfers into or out of Level 3 represent either (1) existing assets and liabilities that were previously categorized as a higher level, but were recategorized to Level 3 because the inputs to the model became unobservable during the period or (2) existing assets and liabilities that were previously classified as Level 3, but were recategorized to a higher level because the lowest significant input became observable during the period. For the three months ended March 31, 2018 and 2017, there were no material transfers between Level 1 and Level 2, Level 1 and Level 3, or Level 2 and Level 3 related to derivative commodity contracts.

The following table describes the valuation techniques and unobservable inputs utilized by the Ameren Companies for the fair value of financial assets and liabilities measured at fair value on a recurring basis and classified as Level 3 in the fair value hierarchy for the periods ended March 31, 2018, and December 31, 2017:



		Fair Value								Weighted Average
		Assets		Liabilities			Valuation Technique(s)	Unobservable Input	Range	Weighted Average
Level 3 Derivative asset and liability – commodity contracts^(a):
2018
	Fuel oils	$	2	$	—		Option model	Volatilities(%)^(b)	21 – 33	24
							Discounted cash flow	Counterparty credit risk(%)^(c)(d)	0.12 – 0.91	0.49
								Ameren Missouri credit risk(%)^(c)(d)	0.35	(e)
	Natural gas	—		(6		)	Discounted cash flow	Nodal basis ($/mmbtu)^(b)	(1.40) – (0.10)	(1)
								Ameren Illinois credit risk (%)^(c)(d)	0.35	(e)
	Power^(f)	5		(192		)	Discounted cash flow	Average forward peak and off-peak pricing – forwards/swaps ($/MWh)^(g)	22 – 37	31
								Estimated auction price for FTRs ($/MW)^(b)	(479) – 1,608	58
								Nodal basis ($/MWh)^(g)	(10) – 0	(2)
								Counterparty credit risk (%)^(c)(d)	0.92	(e)
								Ameren Illinois credit risk (%)^(c)(d)	0.35	(e)
							Fundamental energy production model	Estimated future natural gas prices ($/mmbtu)^(b)	3 – 4	3
								Escalation rate (%)^(b)(h)	4	(e)
							Contract price allocation	Estimated renewable energy credit costs ($/credit)^(b)	5 – 7	6
2017
	Fuel oils	$	3	$	—		Option model	Volatilities (%)^(b)	20 – 26	22
							Discounted cash flow	Counterparty credit risk (%)^(c)(d)	0.12 – 0.72	0.41
								Ameren Missouri credit risk (%)^(c)(d)	0.37	(e)
	Natural gas	1		(4		)	Option model	Volatilities (%)^(b)	26 – 46	37
								Nodal basis ($/mmbtu)^(b)	(0.50) – (0.30)	(0.40)
							Discounted cash flow	Nodal basis ($/mmbtu)^(b)	(1.20) – 0.10	(1)
								Counterparty credit risk (%)^(c)(d)	0.37 – 0.92	0.53
								Ameren credit risk (%)^(c)(d)	0.37	(e)
	Power^(f)	8		(196		)	Discounted cash flow	Average forward peak and off-peak pricing – forwards/swaps ($/MWh)^(g)	24 – 46	28
								Estimated auction price for FTRs ($/MW)^(b)	(65) – 1,823	251
								Nodal basis ($/MWh)^(g)	(10) – 0	(2)
								Counterparty credit risk (%)^(c)(d)	0.28	(e)
								Ameren Illinois credit risk (%)^(c)(d)	0.37	(e)
							Fundamental energy production model	Estimated future natural gas prices ($/mmbtu)^(b)	3 – 4	3
								Escalation rate (%)^(b)(h)	5	(e)
							Contract price allocation	Estimated renewable energy credit costs ($/credit)^(b)	5 – 7	6


(a)	The derivative asset and liability balances are presented net of counterparty credit considerations.


(b)	Generally, significant increases (decreases) in this input in isolation would result in a significantly higher (lower) fair value measurement.


(c)	Generally, significant increases (decreases) in this input in isolation would result in a significantly lower (higher) fair value measurement.


(d)	Counterparty credit risk is applied only to counterparties with derivative asset balances. Ameren Missouri and Ameren Illinois credit risk is applied only to counterparties with derivative liability balances.


(e)	Not applicable.


(f)	Power valuations use visible third-party pricing evaluated by month for peak and off-peak demand through 2021. Valuations beyond 2021 use fundamentally modeled pricing by month for peak and off-peak demand.


(g)	The balance at Ameren is comprised of Ameren Missouri and Ameren Illinois power contracts, which respond differently to unobservable input changes due to their opposing positions.


(h)	Escalation rate applies to power prices in 2031 and beyond.

The following table sets forth, by level within the fair value hierarchy, the carrying amount and fair value of financial assets and liabilities disclosed, but not carried, at fair value as of March 31, 2018, and December 31, 2017:



	March 31, 2018
	Carrying Amount			Fair Value
	Carrying Amount			Level 1		Level 2		Level 3			Total
Ameren:
Cash, cash equivalents, and restricted cash	$	89		$	89	$	—	$	—		$	89
Investments in held-to-maturity debt securities^(a)	276			—		276		—			276
Short-term debt	960			—		960		—			960
Long-term debt (including current portion)^(a)	7,936		^(b)	—		7,820		439		^(c)	8,259
Preferred stock^(d)	142			—		130		—			130
Ameren Missouri:
Cash, cash equivalents, and restricted cash	$	10		$	10	$	—	$	—		$	10
Investments in held-to-maturity debt securities^(a)	276			—		276		—			276
Short-term debt	282			—		282		—			282
Long-term debt (including current portion)^(a)	3,962		^(b)	—		4,201		—			4,201
Preferred stock	80			—		78		—			78
Ameren Illinois:
Cash, cash equivalents, and restricted cash	$	52		$	52	$	—	$	—		$	52
Short-term debt	224			—		224		—			224
Long-term debt (including current portion)	2,830		^(b)	—		2,928		—			2,928
Preferred stock	62			—		52		—			52
	December 31, 2017
Ameren:
Cash, cash equivalents, and restricted cash	$	68		$	68	$	—	$	—		$	68
Investments in held-to-maturity debt securities^(a)	276			—		276		—			276
Short-term debt	484			—		484		—			484
Long-term debt (including current portion)^(a)	7,935		^(b)	—		8,531		—			8,531
Preferred stock^(c)	142			—		131		—			131
Ameren Missouri:
Cash, cash equivalents, and restricted cash	$	7		$	7	$	—	$	—		$	7
Investments in held-to-maturity debt securities^(a)	276			—		276		—			276
Short-term debt	39			—		39		—			39
Long-term debt (including current portion)^(a)	3,961		^(b)	—		4,348		—			4,348
Preferred stock	80			—		80		—			80
Ameren Illinois:
Cash, cash equivalents, and restricted cash	$	41		$	41	$	—	$	—		$	41
Short-term debt	62			—		62		—			62
Long-term debt (including current portion)	2,830		^(b)	—		3,028		—			3,028
Preferred stock	62			—		51		—			51

(a)

Ameren and Ameren Missouri have investments in industrial revenue bonds, classified as held-to-maturity and recorded in “Other Assets,” that are equal to the capital lease obligation for CTs leased from the city of Bowling Green and Audrain County. As of March 31, 2018 and December 31, 2017, the carrying amount of both the investments in industrial revenue bonds and the capital lease obligations approximated fair value.

(b)

Included unamortized debt issuance costs, which were excluded from the fair value measurement, of $49 million, $20 million, and $24 million for Ameren, Ameren Missouri, and Ameren Illinois, respectively, as of March 31, 2018. Included unamortized debt issuance costs, which were excluded from the fair value measurement, of $50 million, $20 million, and $24 million for Ameren, Ameren Missouri, and Ameren Illinois, respectively, as of December 31, 2017.


(c)	The Level 3 fair value amount consists of ATXI’s senior unsecured notes. For the three months ended March 31, 2018, the amount was transferred to Level 3 because inputs to the valuation model became unobservable during the period.


(d)	Preferred stock is recorded in “Noncontrolling Interests” on the consolidated balance sheet.