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 the following three hierarchy levels:

Level 1 (quoted prices in active markets for identical assets or liabilities): Inputs based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities are primarily exchange-traded derivatives and assets, including cash and cash equivalents and listed equity securities.

The market approach is used to measure the fair value of equity securities held in Ameren Missouri’s nuclear decommissioning trust fund. Equity securities in this fund are representative of the S&P 500 index, excluding securities of Ameren Corporation, owners and/or operators of nuclear power plants, and the trustee and investment managers. The S&P 500 index comprises stocks of large-capitalization companies.

Level 2 (significant other observable inputs): Market-based inputs corroborated by third-party brokers or exchanges based on transacted market data. Level 2 assets and liabilities include certain assets held in Ameren Missouri’s nuclear decommissioning trust fund, including United States Treasury and agency securities, corporate bonds and other fixed-income securities, and certain over-the-counter derivative instruments, including natural gas and financial power transactions.

Fixed income securities are valued by using prices from independent industry-recognized data vendors who provide values that are either exchange-based or matrix-based. The fair value measurements of fixed-income securities classified as Level 2 are based on inputs other than quoted prices that are observable for the asset or liability. Examples are matrix pricing, market corroborated pricing, and inputs such as yield curves and indices.

Derivative instruments classified as Level 2 are valued by corroborated observable inputs, such as pricing services or prices from similar instruments that trade in liquid markets. Our development and corroboration process entails obtaining multiple quotes or prices from outside sources. To derive our forward view to price our derivative instruments at fair value, we average the bid/ask spreads to the midpoints. To validate forward prices obtained from outside parties, we compare the pricing to recently settled market transactions. Additionally, a review of all sources is performed to identify any anomalies or potential errors. Further, we consider the volume of transactions on certain trading platforms in our reasonableness assessment of the averaged midpoints. The value of natural gas derivative contracts is based upon exchange closing prices without significant unobservable adjustments. The value of power derivative contracts is based upon exchange closing prices or the use of multiple forward prices provided by third parties. The prices are averaged and shaped to a monthly profile when needed without significant unobservable adjustments.

Level 3 (significant other unobservable inputs): Unobservable inputs that are not corroborated by market data. Level 3 assets and liabilities are valued by internally developed models and assumptions or methodologies that use significant unobservable inputs. Level 3 assets and liabilities include derivative instruments that trade in less liquid markets, where pricing is largely unobservable. We value Level 3 instruments by using pricing models with inputs that are often unobservable in the market, such as certain internal assumptions, quotes or prices from outside sources not supported by a liquid market, or escalation rates. Our development and corroboration process entails reasonableness reviews and an evaluation of all sources to identify any anomalies or potential errors.

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 material gains or losses related to valuation adjustments for counterparty default risk were recorded at Ameren, Ameren Missouri, or Ameren Illinois in 2018, 2017, or 2016. At December 31, 2018 and 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 December 31, 2018 and 2017:



		December 31, 2018									December 31, 2017
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:
Ameren
	Derivative assets – commodity contracts^(a):
	Fuel oils	$	1	$	—	$	7	$	8		$	4	$	—	$	3	$	7
	Natural gas	—		2		1		3			—		—		1		1
	Power	—		1		3		4			—		1		8		9
	Total derivative assets – commodity contracts	$	1	$	3	$	11	$	15		$	4	$	1	$	12	$	17
	Nuclear decommissioning trust fund:
	Equity securities:
	U.S. large capitalization	$	427	$	—	$	—	$	427		$	468	$	—	$	—	$	468
	Debt securities:
	U.S. Treasury and agency securities	—		148		—		148			—		125		—		125
	Corporate bonds	—		72		—		72			—		82		—		82
	Other	—		32		—		32			—		25		—		25
	Total nuclear decommissioning trust fund	$	427	$	252	$	—	$	679	^(b)	$	468	$	232	$	—	$	700	^(b)
	Total Ameren	$	428	$	255	$	11	$	694		$	472	$	233	$	12	$	717
Ameren Missouri
	Derivative assets – commodity contracts^(a):
	Fuel oils	$	1	$	—	$	7	$	8		$	4	$	—	$	3	$	7
	Natural gas	—		—		—		—			—		—		1		1
	Power	—		1		3		4			—		1		8		9
	Total derivative assets – commodity contracts	$	1	$	1	$	10	$	12		$	4	$	1	$	12	$	17
	Nuclear decommissioning trust fund:
	Equity securities:
	U.S. large capitalization	$	427	$	—	$	—	$	427		$	468	$	—	$	—	$	468
	Debt securities:
	U.S. Treasury and agency securities	—		148		—		148			—		125		—		125
	Corporate bonds	—		72		—		72			—		82		—		82
	Other	—		32		—		32			—		25		—		25
	Total nuclear decommissioning trust fund	$	427	$	252	$	—	$	679	^(b)	$	468	$	232	$	—	$	700	^(b)
	Total Ameren Missouri	$	428	$	253	$	10	$	691		$	472	$	233	$	12	$	717
Ameren Illinois
	Derivative assets – commodity contracts^(a):
	Natural gas	$	—	$	2	$	1	$	3		$	—	$	—	$	—	$	—
Liabilities:
Ameren
	Derivative liabilities – commodity contracts^(a):
	Fuel oils	$	2	$	—	$	11	$	13		$	—	$	—	$	—	$	—
	Natural gas	—		15		4		19			1		25		4		30
	Power	—		1		186		187			—		—		196		196
	Total Ameren	$	2	$	16	$	201	$	219		$	1	$	25	$	200	$	226
Ameren Missouri
	Derivative liabilities – commodity contracts^(a):
	Fuel oils	$	2	$	—	$	11	$	13		$	—	$	—	$	—	$	—
	Natural gas	—		5		—		5			—		7		1		8
	Power	—		1		3		4			—		—		1		1
	Total Ameren Missouri	$	2	$	6	$	14	$	22		$	—	$	7	$	2	$	9
Ameren Illinois
	Derivative liabilities – commodity contracts^(a):
	Natural gas	$	—	$	10	$	4	$	14		$	1	$	18	$	3	$	22
	Power	—		—		183		183			—		—		195		195
	Total Ameren Illinois	$	—	$	10	$	187	$	197		$	1	$	18	$	198	$	217


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


(b)	Balance excludes $5 million and $4 million of cash and cash equivalents, receivables, payables, and accrued income, net for December 31, 2018 and 2017, respectively.

See Note 10 – Retirement Benefits for tables that set forth, by level within the fair value hierarchy, Ameren’s pension and postretirement plan assets as of December 31, 2018 and 2017.

Level 3 fuel oils and natural gas derivative contract assets and liabilities measured at fair value on a recurring basis were immaterial for all periods presented. The following table presents the fair value reconciliation of Level 3 power derivative contract assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2018 and 2017:



	2018									2017
	Ameren Missouri			Ameren Illinois			Ameren			Ameren Missouri			Ameren Illinois			Ameren
Beginning balance at January 1	$	7		$	(195	)	$	(188	)	$	7		$	(185	)	$	(178	)
Realized and unrealized gains (losses) included in regulatory assets/liabilities	(6		)	—			(6		)	(4		)	(21		)	(25		)
Purchases	5			—			5			14			—			14
Sales	—			—			—			1			—			1
Settlements	(5		)	12			7			(11		)	11			—
Transfers out of Level 3	(1		)	—			(1		)	—			—			—
Ending balance at December 31	$	—		$	(183	)	$	(183	)	$	7		$	(195	)	$	(188	)
Change in unrealized gains (losses) related to assets/liabilities held at December 31	$	(1	)	$	(2	)	$	(3	)	$	—		$	(22	)	$	(22	)

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 years ended December 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.

All gains or losses related to our Level 3 derivative commodity contracts are expected to be recovered or returned through customer rates; therefore, there is no impact to net income resulting from changes in the fair value of these instruments.

The following table describes the valuation techniques and significant unobservable inputs utilized for the fair value of our Level 3 power derivative contract assets and liabilities as of December 31, 2018 and 2017:



		Fair Value^(a)								Weighted
	Commodity	Assets		Liabilities			Valuation Technique(s)	Unobservable Input	Range	Average
2018	Power^(b)	$	3	$	(186	)	Discounted cash flow	Average forward peak and off-peak pricing – forwards/swaps($/MWh)^(c)	23 – 39	28
								Nodal basis($/MWh)^(c)	(9) – 0	(2)
							Fundamental energy production model	Estimated future natural gas prices($/mmbtu)^(c)	3 – 4	3
								Escalation rate(%)^(c)(d)	4 – 5	4
2017	Power^(b)	$	8	$	(196	)	Discounted cash flow	Average forward peak and off-peak pricing – forwards/swaps($/MWh)^(c)	24 – 46	28
								Nodal basis($/MWh)^(c)	(10) – 0	(2)
							Fundamental energy production model	Estimated future natural gas prices($/mmbtu)^(c)	3 – 4	3
								Escalation rate(%)^(c)(d)	5	5

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


(b)	Power valuations use visible third-party pricing evaluated by month for peak and off-peak demand through 2022 and 2021 for December 31, 2018 and 2017, respectively. Valuations beyond 2022 and 2021 for December 31, 2018 and 2017, respectively, use fundamentally modeled pricing by month for peak and off-peak demand.


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


(d)	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 December 31, 2018 and 2017:



	December 31, 2018
	Carrying Amount			Fair Value
	Carrying Amount			Level 1		Level 2		Level 3			Total
Ameren:
Cash, cash equivalents, and restricted cash	$	107		$	107	$	—	$	—		$	107
Investments in held-to-maturity debt securities^(a)	270			—		270		—			270
Short-term debt	597			—		597		—			597
Long-term debt (including current portion)^(a)	8,439		^(b)	—		8,240		429		^(c)	8,669
Ameren Missouri:
Cash, cash equivalents, and restricted cash	$	8		$	8	$	—	$	—		$	8
Investments in held-to-maturity debt securities^(a)	270			—		270		—			270
Short-term debt	55			—		55		—			55
Long-term debt (including current portion)^(a)	3,998		^(b)	—		4,156		—			4,156
Ameren Illinois:
Cash, cash equivalents, and restricted cash	$	80		$	80	$	—	$	—		$	80
Short-term debt	72			—		72		—			72
Long-term debt (including current portion)	3,296		^(b)	—		3,391		—			3,391
	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
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
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

(a)

Ameren and Ameren Missouri have investments in industrial development revenue bonds, classified as held-to-maturity and recorded in “Other Assets,” that are equal to the finance obligations for the Peno Creek and Audrain CT energy centers. As of December 31, 2018 and 2017, the carrying amount of both the investments in industrial development revenue bonds and the finance obligations approximated fair value.

(b)

Included unamortized debt issuance costs, which were excluded from the fair value measurement, of $58 million, $22 million, and $31 million for Ameren, Ameren Missouri, and Ameren Illinois, respectively, as of December 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. In the first quarter of 2018, the amount was transferred to Level 3 because inputs to the valuation model became unobservable during the period.