Ameren Corporation (AEE)

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Ameren Corporation (AEE)

March 14, 2013 11:00 am ET

Executives

Douglas Fischer

Thomas R. Voss - Chairman, Chief Executive Officer and President

Martin J. Lyons - Chief Financial Officer and Executive Vice President

Analysts

Stephen Byrd - Morgan Stanley, Research Division

Paul Patterson - Glenrock Associates LLC

Julien Dumoulin-Smith - UBS Investment Bank, Research Division

Terry Shu

George Joachim Sebastian Schultze - Schultze Asset Management, LLC

Ashar Khan

Dan Jenkins

Joseph DeSapri - Morningstar Inc., Research Division

Tom Rebinoff

Jonathan Cohen - ISI Group Inc., Research Division

Presentation

Operator

Good day, and welcome to Ameren's Business Strategy Update Conference Call. Please note that today's call is 30 minutes and will be recorded. It is now my pleasure to introduce your host, Doug Fischer, Senior Director of Investor Relations for Ameren Corporation. Thank you. Mr. Fischer, you may begin.

Douglas Fischer

Good morning, and thank you for joining us. We appreciate your attention on short notice. On today's call, we will discuss our agreement to divest our merchant generation business and our future business strategy. With me today are Tom Voss, our Chairman, President and Chief Executive Officer; Marty Lyons, our Executive Vice President and Chief Financial Officer; and other members of the Ameren management team.

First, I need to cover a few housekeeping items. This call is being broadcast live on the Internet, and the webcast will be available for 1 year at ameren.com. Also, the Investors Webcast and Presentation section of our website contains the presentation that will be referenced during this call.

Turning to Page 2 of the presentation, I need to inform you that comments made this -- during this conference call may contain statements that are commonly referred to as forward-looking statements. Such statements include those about future expectations, beliefs, plans, strategies, objectives, events, conditions and financial performance.

We caution you that various factors could cause actual results to differ materially from those anticipated and described in the forward-looking statements. For additional information concerning these factors, please read the Forward-looking Statement section in the news release we issued today and the Forward-looking Statements and Risk Factors section in our filings with the SEC.

Tom and Marty will provide comments on the transaction we announced this morning and our strategy for growing our rate-regulated utility businesses, then we will open the call for questions. I would now like to turn the call over to Tom, who will start on Page 3 of the presentation.

Thomas R. Voss

Thanks, Doug. Good morning, everyone, and thank you for joining us. As we announced this morning, we've reached a definitive agreement to divest our merchant generation business. The business will be acquired by Illinois Power Holdings, an affiliate of Dynegy Inc. Today marks a positive transition for Ameren and Ameren Energy Resources, or AER, our merchant generation subsidiary. As we mentioned on our February earnings call, Ameren no longer considers merchant generation to be a core component of our future business strategy.

The volatility of earnings and cash flows of the merchant generation business, as well as the uncertainty regarding future returns on incremental capital invested, are not in alignment with the value proposition associated with our rate-regulated businesses. The shift to an all rate-regulated business model will reduce Ameren Corporation's business risk and is expected to substantially improve the predictability of future earnings and cash flows. Cash flow predictability will help ensure that we meet our expectation of growing rate base at an estimated 7% compound annual growth rate over the next 5 years and our investor's expectation of a strong dividend.

As you know, we've been minimizing investment in AER and instead have directed our growth capital to our rate-regulated businesses, where we believe we can earn fair returns either today or with proposed enhancements to our regulatory frameworks. This transaction will allow Ameren to focus exclusively on our rate-regulated electric, natural gas and transmission businesses, clarifying our strategic direction and value proposition to investors. It will not impact the electric and natural gas utility service provided by Ameren's rate-regulated utility businesses, Ameren Illinois and Ameren Missouri. The agreement is the result of competitive negotiations. The total value benefits to Ameren associated with the divestiture are estimated at approximately $900 million, including the net present value of tax benefits. We anticipate that closing will occur in the fourth quarter of 2013.

Before handing the call over to Marty to address the transaction terms and further financial impacts, I would like to make a few comments about our merchant generation employees. This decision is in no way a reflection on the employees of AER. Our employees have done a tremendous job of operating our generating facility safely and efficiently and managing the organization to adapt to current and future market environments. Specifically, the AER team has proactively addressed the environmental and market challenges it has faced, and I'd like to thank the employees for their hard work and professionalism. Under the agreement, the buyer will honor collective bargain agreements for AER union employees and provide those AER management employees who continue to work for the buyer with competitive pay and benefits. With the new owner will come new opportunities for AER, and we will work to make the transition as smooth as possible.

With that, I will turn the call over to Marty.

Martin J. Lyons

Thanks, Tom, and good morning, everyone. On Slide 4, we provide an overview of the transaction terms. As Tom mentioned, we reached a definitive agreement to divest our merchant generation business to Illinois Power Holdings, an affiliate of Dynegy.

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