Ameren Corporation (AEE)

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Ameren Corporation (AEE)

Q4 2010 Earnings Conference Call

February 22, 2011, 10:00 am ET


Doug Fischer – IR

Tom Voss – Chairman, President and CEO

Marty Lyons – SVP and CFO

Warner Baxter – President and CEO, Ameren Missouri

Scott Cisel – President and CEO, Ameren Illinois


Paul Ridzon – KeyBanc

Reza Hatefi – Decade Capital

Paul Patterson – Glenrock Associates

Erica Piserchia – Wunderlich Securities

Ashar Khan – Visium

Julien Dumoulin-Smith – UBS

Robert Howell – Prospectus Partners

David Katz – Bank of America

Michael Lapides – Goldman Sachs

Dan Jenkins – State of Wisconsin Investment Board

Charles Stunnet [ph] – Stunnet Research [ph]

Sarah Eccles – Wells Fargo Advisors

Steven Gambuzza – Longbow Capital

Daniele Seitz – Dudack Research



Welcome to the Ameren Corporation’s Year-End and Fourth-Quarter Earnings Call. At this time, all participants’ are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Douglas Fischer, Director of Investor Relations for Ameren Corporation. Thank you, Mr. Fischer. You may begin.

Doug Fischer

Thank you, and good morning. I am Doug Fischer, Director of Investor Relations for Ameren Corporation. On the call with me today are our Chairman, President, and Chief Executive Officer; Tom Voss; our Senior Vice President and Chief Financial Officer, Marty Lyons; and other members of the Ameren management team.

Before we begin, let me cover a few administrative details. The call will be available by telephone for one week to anyone who wishes to hear it by dialing a playback number. The announcement you received in our news release include instructions for replaying the call by telephone. This call will also be broadcast live on the Internet and the webcast will be available for one year on our Web site at

This call contains time sensitive data that is accurate only as of the date of today’s live broadcast. Redistribution of this broadcast is prohibited. To assist with our call this morning, we’ve posted a presentation on our Web site to which we’ll refer during this call. To access this presentation, please look in the Investors section of our Web site under ‘Webcasts and Presentations’ and follow the appropriate link.

Turning to page #2 of the presentation, I need to inform you that comments made 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 sections in our filings with the SEC.

Tom will begin this call with an overview of 2010 earnings and 2011 guidance, followed by a discussion of recent business developments. Marty will follow with more detailed discussions of 2010 financial results, our 2011 guidance and regulatory and financial matters. We’ll then open the call for questions. Here’s Tom who will start on page #3 of the presentation.

Tom Voss

Thanks, Doug. Good morning and thank you for joining us. The past year was marked by significant accomplishments at our company. I’m pleased to report that 2010 core earnings reached $2.75 per share within the upper end of our most recent earnings guidance range issued in late October and nearly equaling 2009 core earnings of $2.79 per share.

Improved earnings at our regulated utilities nearly offset a decline in core results from our Merchant Generation business. Factors favorably affecting 2010 core earnings included a 9% increase in electric Kwh sales to native load customers, new electric utility rates, lower financing cost and disciplined cost management.

The increase in Kwh sales was the result of favorable weather, a recovering economy, and the return to full service of the large customers’ aluminum smelter plant. Total kwh sales to industrial customers rose 16% and even after excluding sales to the aluminum smelter plant, industrial sales increased 8%. Kwh sales to residential and commercial customers rose 7%.

Items offsetting these favorable factors included lower Merchant Generation margins due to lower power prices and higher fuel and related transportation cost and higher companywide depreciation and amortization expenses.

Overall, our non-fuel operations and maintenance cost increased only slightly reflecting the cost of the refueling outage at our Callaway Nuclear Plant, offset by disciplined cost management across all of our business segments.

You may recall that our nuclear plant did not have a refueling outage in 2009. Per share results also reflected an increased average number of common shares outstanding.

Turning to page #4, you will find a list of other accomplishments in 2010. We’ve discussed many of these with you previously, so I won’t touch on each of them. However, I’d like to highlight the fact that free cash flow reached the positive $341 million in 2010. In addition, our safety and customer satisfaction showed improvement compared to 2009, as both power plant and distribution system reliability remained solid.

We returned our newly rebuild Taum Sauk pumped storage hydroelectric plant to service and placed scrubbers into service at three of our power generating units. And we launched plants for growing our transmission business. All of the accomplishments listed were the result of a focused and dedicated workforce.

Moving now to page #5 today, we also announced 2011 GAAP and core earnings guidance of $2.20 per share to $2.60 per share. The expected decline in 2011 core earnings per share compared to 2010 primarily reflects an assumed return to normal weather and expected lower margins at our Merchant Generation business.

I’m pleased to report that we expect positive free cash flow in 2011. In fact, our Merchant Generation business expects positive free cash flow, even though 2011 capital expenditures for this segment are expected to increase, compared to prior guidance.

This increase in capital expenditures reflects our plan to accelerate the installation of scrubbers at our Newton plant and the addition of an equipment upgrade at one of our large Merchant Generation plants.

We’ve moved up the in-service dates of the two scrubbers at Newton by approximately one year to late 2013 and spring 2014. This decision was driven by our plants are complying with the US EPA proposed Clean Air Transport Rule.

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