UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From to
Commission file number 333-56594.
AMEREN ENERGY GENERATING COMPANY
(Exact name of registrant as specified in its charter)
Illinois 37-1395586
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1901 Chouteau Ave., St. Louis, Missouri 63103
(Address of principal executive offices and Zip Code)
Registrant's telephone number,
including area code: (314) 554-3922
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
------- -------
Shares outstanding of each of registrant's classes of common stock as of
August 9, 2002: Common Stock, no par value, held by AmerenEnergy Development
Company (parent company of Registrant) - 2,000
AMEREN ENERGY GENERATING COMPANY
INDEX
Page
----
PART I. Financial Information
ITEM 1. Financial Statements (Unaudited)
Balance Sheet at June 30, 2002 and December 31, 2001...................................... 2
Statement of Income for the three and six months ended June 30, 2002 and 2001............. 3
Statement of Cash Flows for the six months ended June 30, 2002 and 2001................... 4
Statement of Common Stockholder's Equity for the three and six months ended
June 30, 2002 and 2001.................................................................... 5
Notes to Financial Statements............................................................. 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..... 13
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk................................ 19
PART II. Other Information
ITEM 1. Legal Proceedings......................................................................... 22
ITEM 5. Other Information......................................................................... 22
ITEM 6. Exhibits and Reports on Form 8-K.......................................................... 22
SIGNATURE.............................................................................................. 24
1
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
AMEREN ENERGY GENERATING COMPANY
BALANCE SHEET
(Unaudited, in millions, except shares)
June 30, December 31,
2002 2001
------------- ------------
ASSETS:
Property and plant, at original cost:
Electric $ 2,212 $ 2,141
Less accumulated depreciation and amortization 713 689
------------- ------------
1,499 1,452
Construction work in progress 33 60
------------- ------------
Total property and plant, net 1,532 1,512
------------- ------------
Current assets:
Cash and cash equivalents 8 2
Accounts receivable - intercompany 71 121
Accounts receivable 11 8
Notes receivable - intercompany 33 -
Materials and supplies, at average cost -
Fossil fuel 36 40
Other 22 20
Other - 2
-------------- ------------
Total current assets 181 193
-------------- ------------
Deferred income taxes 27 38
Other 32 13
-------------- ------------
Total regulatory assets 59 51
-------------- ------------
Total Assets $ 1,772 $ 1,756
============== ============
CAPITAL AND LIABILITIES:
Capitalization:
Common stock, no par value, 10,000 shares authorized -
2,000 shares outstanding $ - $ -
Other paid-in capital 150 150
Retained earnings 133 120
Accumulated other comprehensive income 3 4
------------- ------------
Total common stockholder's equity 286 274
------------- ------------
Long-term debt 698 424
------------- ------------
Total capitalization 984 698
------------- ------------
Current liabilities:
Current portion of subordinated notes payable - intercompany 50 47
Accounts and wages payable 46 63
Accounts and wages payable - intercompany 30 181
Notes payable - intercompany - 62
Current portion of income tax payable - intercompany 14 18
Taxes payable 16 12
Interest payable 7 6
Interest payable - intercompany 11 6
Other 4 3
------------- ------------
Total current liabilities 178 398
------------- ------------
Subordinated notes payable - intercompany 412 461
Accumulated deferred investment tax credits 16 17
Income tax payable - intercompany 170 177
Other deferred credits and liabilities 12 5
------------- ------------
Total Capital and Liabilities $ 1,772 $ 1,756
============= ============
See Notes to Financial Statements.
2
AMEREN ENERGY GENERATING COMPANY
STATEMENT OF INCOME
(Unaudited, in millions)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
2002 2001 2002 2001
---- ---- ---- ----
OPERATING REVENUES:
Electric - intercompany $ 157 $ 140 $ 314 $ 286
Electric 59 67 163 125
Other - intercompany 3 4 6 7
------------- ------------- ------------- -------------
Total operating revenues 219 211 483 418
------------- ------------- ------------- -------------
OPERATING EXPENSES:
Operations
Fuel and purchased power 123 117 289 231
Other 30 26 58 50
------------- ------------- ------------- -------------
153 143 347 281
Maintenance 17 14 26 23
Depreciation and amortization 17 13 33 24
Other taxes 6 4 12 10
------------- ------------- ------------- -------------
Total operating expenses 193 174 418 338
------------- ------------- ------------- -------------
OPERATING INCOME 26 37 65 80
OTHER INCOME AND (DEDUCTIONS):
Miscellaneous, net -
Miscellaneous income - 1 - 3
Miscellaneous expense - (1) - (1)
------------- ------------- ------------- -------------
Total other income and (deductions) - - - 2
------------- ------------- ------------- -------------
INTEREST CHARGES:
Interest expense - intercompany 12 10 22 21
Interest expense 10 8 18 17
------------- ------------- ------------- -------------
Total interest charges 22 18 40 38
------------- ------------- ------------- -------------
INCOME TAXES 2 7 10 17
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 2 12 15 27
Cumulative effect of change in accounting
principle, net of income taxes - - - (2)
------------- ------------- ------------- -------------
NET INCOME $ 2 $ 12 $ 15 $ 25
============= ============= ============= =============
See Notes to Financial Statements.
3
AMEREN ENERGY GENERATING COMPANY
STATEMENT OF CASH FLOWS
(Unaudited, in millions)
Six Months Ended
June 30,
------------------------
2002 2001
---- ----
Cash Flows From Operating:
Net income $ 15 $ 25
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting principle - 2
Depreciation and amortization 33 24
Deferred income taxes, net 11 7
Deferred investment tax credits, net (1) (1)
Other (1) (2)
Changes in assets and liabilities:
Accounts receivable (4) 42
Accounts receivable - intercompany 50 (99)
Materials and supplies 2 (21)
Accounts and wages payable (17) 14
Accounts and wages payable - intercompany (11) 136
Taxes payable 4 (1)
Income tax payable-intercompany (11) (8)
Interest payable 1 -
Interest payable - intercompany 5 (1)
Assets, other (16) (8)
Liabilities, other 8 12
-------- ---------
Net cash provided by operating activities 68 121
-------- ---------
Cash Flows From Investing:
Construction expenditures (190) (164)
Intercompany notes receivable - short-term (33) 88
-------- ---------
Net cash used in investing activities (223) (76)
-------- ---------
Cash Flows From Financing:
Dividends on paid-in capital (2) -
Debt issuance costs (3) -
Redemptions:
Intercompany notes payable - long-term (46) (44)
Intercompany notes payable - short-term (62) -
Issuances:
Long-term debt 274 -
-------- ---------
Net cash provided by (used in) financing activities 161 (44)
-------- ---------
Net change in cash and cash equivalents 6 1
Cash and cash equivalents at beginning of year 2 1
-------- ---------
Cash and cash equivalents at end of period $ 8 $ 2
======== =========
Cash paid during the periods:
Interest $ 33 $ 35
Income taxes, net 4 15
See Notes to Financial Statements.
4
AMEREN ENERGY GENERATING COMPANY
STATEMENT OF COMMON STOCKHOLDER'S EQUITY
(Unaudited, in millions)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2002 2001 2002 2001
---- ---- ---- ----
Common stock $ - $ - $ - $ -
Other paid-in capital
Beginning balance 150 - 150 -
Change in current period - - - -
----------- ------------ ----------- ----------
150 - 150 -
----------- ------------ ----------- ----------
Retained earnings
Beginning balance 132 57 120 44
Net income 2 12 15 25
Dividends to parent (1) - (2) -
----------- ------------ ----------- ----------
133 69 133 69
----------- ------------ ----------- ----------
Accumulated other comprehensive income
Beginning balance 2 (1) 4 -
Change in current period (see below) 1 (1) (1) (2)
----------- ------------ ----------- ----------
3 (2) 3 (2)
----------- ------------ ----------- ----------
Total common stockholder's equity $ 286 $ 67 $ 286 $ 67
=========== ============ =========== ==========
Comprehensive income, net of taxes
Net income $ 2 $ 12 $ 15 $ 25
Unrealized net gain/(loss) on derivative hedging instruments
(net of income taxes of $-, $(1), $ - and $(1), respectively) 1 (1) - (1)
Reclassification adjustments for gains/(losses) included in net income
(net of income taxes of $ -, $ -, $(1) and $1, respectively) - - (1) 2
Cumulative effect of accounting change, net of income taxes of $(2) - - - (3)
----------- ----------- ----------- ----------
Total comprehensive income, net of taxes $ 3 $ 11 $ 14 $ 23
=========== ============ =========== ==========
See Notes to Financial Statements.
5
AMEREN ENERGY GENERATING COMPANY
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2002
NOTE 1 - Summary of Significant Accounting Policies
Basis of Presentation
Our financial statements reflect all adjustments (which include normal,
recurring adjustments) necessary, in our opinion, for a fair presentation of the
interim results. These statements should be read in conjunction with the
financial statements and the notes thereto included in our 2001 Annual Report on
Form 10-K.
When we refer to our, we or us, we are referring to AmerenEnergy Generating
Company and in some cases our agents, AmerenEnergy, Inc. (AmerenEnergy) and
AmerenEnergy Fuels and Services Company (Fuels Company). All dollar amounts are
in millions, unless otherwise indicated.
Accounting Changes
In January 2001, we adopted Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities."
The impact of that adoption resulted in a cumulative effect charge of $2 million
after taxes to the income statement, and a cumulative effect adjustment of $3
million after taxes to Accumulated Other Comprehensive Income (OCI), which
reduced common stockholder's equity.
On January 1, 2002 we adopted SFAS No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS 141 requires business
combinations to be accounted for under the purchase method of accounting, which
requires one party in the transaction to be identified as the acquiring
enterprise and for that party to allocate the purchase price to the assets and
liabilities of the acquired enterprise based on fair market value. SFAS 142
requires goodwill and indefinite lived intangible assets recorded in the
financial statements to be tested for impairment at least annually, rather than
amortized over a fixed period, with impairment losses recorded in the income
statement. SFAS 141 and SFAS 142 did not have any effect on our financial
position, results of operations or liquidity upon adoption. See Note 6 -
"CILCORP Acquisition."
In July 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations"
was issued. SFAS 143 requires an entity to record a liability and corresponding
asset representing the present value of legal obligations associated with the
retirement of tangible, long-lived assets. SFAS 143 is effective for us on
January 1, 2003. At this time, we are assessing the impact of SFAS 143 on our
financial position, results of operations and liquidity upon adoption.
On January 1, 2002 we adopted SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." SFAS 144 addresses the financial accounting
and reporting for the impairment or disposal of long-lived assets and supersedes
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." SFAS 144 retains the guidance related to calculating
and recording impairment losses, but adds guidance on the accounting for
discontinued operations, previously accounted for under Accounting Principles
Board Opinion No. 30. We evaluate long-lived assets for impairment when events
or changes in circumstances indicate that the carrying value of such assets may
not be recoverable. The determination of whether impairment has occurred is
based on an estimate of undiscounted cash flows attributable to the assets, as
compared with the carrying value of the assets. If impairment has occurred, the
amount of the impairment recognized is determined by estimating the fair value
of the assets and recording a provision for loss if the carrying value is
greater than the fair value. SFAS 144 did not have any effect on our financial
position, results of operations or liquidity upon adoption.
Historically, our accounting practice was to present all settled energy
purchase or sale contracts within our power risk management program on a gross
basis in Operating Revenues - Electric and in Operating Expenses - Operations -
Fuel and Purchased Power in our income statement. This means that revenues were
recorded for the notional amount of power sale contracts with a corresponding
charge to income for the cost of the energy that has been generated or for the
notional amount of a purchased power contract. In June 2002, the Emerging Issues
Task Force (or EITF) reached a consensus in Issue 02-03, "Accounting for
Contracts Involved in Energy Trading and Risk Management Activities," that
certain energy contracts
6
should be shown on a net basis in the income statement. The consensus on this
issue is applicable to financial statements for periods ending after July 15,
2002, with a requirement to conform prior periods to this presentation. As a
result of the EITF's accounting guidance and other factors that exist within our
industry, beginning with the period ending September 30, 2002, we will change
our accounting practice to present, on a net basis in our income statement, all
contracts within our power risk management program that have been financially
net settled. All prior periods included in our prospective financial statements
will be reclassified to reflect this change in accounting practice. We are still
in the process of evaluating the impact of this change to our income statement,
but our revenues and operating expenses will be reduced in future periods with
no impact on our earnings. See Note 4 - "Derivative Financial Instruments" for
additional information.
Interchange Revenues
Interchange revenues included in Operating Revenues - Electric -
Intercompany and Electric were $67 million for the three months ended June 30,
2002 (2001 - $73 million) and $181 million for the six months ended June 30,
2002 (2001 - $139 million).
Purchased Power
Purchased power included in Operating Expenses, Operations - Fuel and
Purchased Power was $68 million for the three months ended June 30, 2002 (2001 -
$76 million) and $183 million for the six months ended June 30, 2002 (2001 -
$151 million).
NOTE 2 - Rate and Regulatory Matters
Missouri
In order to satisfy its regulatory load requirements for 2001, our
affiliate, Union Electric Company, (known as AmerenUE), purchased, under a one
year contract, 450 megawatts of capacity and energy from another of our
affiliates, AmerenEnergy Marketing Company (Marketing Company) (the 2001
Marketing Company - AmerenUE agreement). Marketing Company acquired the power to
supply AmerenUE from us. This agreement was entered into through a competitive
bidding process and reflected market-based rates. For 2002, AmerenUE, similarly
entered into a one year contract with Marketing Company for the purchase of 200
megawatts of capacity and energy at lower prices than in 2001 (the 2002
Marketing Company - AmerenUE agreement). Marketing Company expects to acquire
the power to supply AmerenUE from us and other sources, which because of the
smaller quantity purchased and the lower prices, will result in lower revenues
to us.
In May 2001, the Missouri Public Service Commission (MoPSC) filed a
complaint with the Securities and Exchange Commission (SEC) relating to the 2001
Marketing Company - AmerenUE agreement. The complaint requested an investigation
into the contractual relationship between us, Marketing Company and AmerenUE in
the context of the 2001 Marketing Company - AmerenUE agreement and requests that
the SEC find that such relationship violates a provision of the Public Utility
Holding Company Act of 1935 (or PUHCA), which requires state utility commission
approval of power sales contracts between an electric utility company and an
affiliated electric wholesale generator, like us. We believe that the MoPSC's
approval of the power sales agreement under PUHCA is not required because we are
not a party to the agreement. As a remedy, the MoPSC proposes that the SEC
require AmerenUE to contract directly with us and submit such contract to the
MoPSC for review. On May 9, 2002, the MoPSC filed a similar complaint with the
SEC relating to the 2002 Marketing Company - AmerenUE agreement. The SEC is
investigating these matters. Also, with respect to the 2002 Marketing Company -
AmerenUE agreement, on May 31, 2002, the Federal Energy Regulatory Commission
(FERC) accepted the agreement, subject to refund, and scheduled the matter for
hearing to assess the appropriateness of the rates charged in January 2003. At
this time, management is unable to predict the outcome of these proceedings or
the ultimate impact on our future financial position, results of operations or
liquidity.
Illinois
In December 1997, the Electric Service Customer Choice and Rate Relief Law
of 1997 (the Illinois Law) was enacted providing for electric utility
restructuring in Illinois. This legislation introduced competition into the
retail supply of electric energy in Illinois. Illinois residential customers
were offered
7
choice in suppliers on May 1, 2002. Industrial and commercial customers were
previously offered this choice.
The Illinois Law contained a provision freezing retail bundled electric
rates through January 1, 2005. In 2002, legislation was passed and signed into
law that extended the rate freeze period through January 1, 2007. The offering
of choice to the industrial and commercial customers of our affiliate, Central
Illinois Public Service Company (known as AmerenCIPS), which is indirectly
supplied power by us through Marketing Co., has not had a material adverse
effect on our business and we do not expect the offering of choice to
AmerenCIPS' residential customers, or the extension of the rate freeze, to have
a material adverse effect on our business.
Federal - Regional Transmission Organizations
In December 1999, the FERC issued Order 2000 requiring all utilities,
subject to FERC jurisdiction, to state their intentions for joining a regional
transmission organization (RTO). RTOs are independent organizations that will
functionally control the transmission assets of utilities in order to improve
the wholesale power market. Since January 2001, AmerenUE and AmerenCIPS, along
with several other utilities, were seeking approval from the FERC to participate
in an RTO known as the Alliance RTO. The Ameren companies had previously been a
member of the Midwest Independent System Operator (MISO) and recorded a pretax
charge to earnings in 2000 of $25 million ($15 million after taxes) for an exit
fee and other costs when it left that organization. Ameren felt the for-profit
Alliance RTO business model was superior to the non-for-profit MISO business
model and provided it with a more equitable return on our transmission assets.
In late 2001, the FERC issued an order that rejected the formation of the
Alliance RTO and ordered the Alliance RTO companies and the MISO to discuss how
the Alliance RTO business model could be accommodated within the Midwest ISO. On
April 25, 2002, after the Alliance RTO and MISO failed to reach an agreement,
and after a series of filings by the two parties with the FERC, the FERC issued
a declaratory order setting forth the division of responsibilities between the
MISO and National Grid (the managing member of the transmission company formed
by the Alliance companies) and approved the rate design and the revenue
distribution methodology proposed by the Alliance companies. However, the FERC
denied a request by the Alliance companies and National Grid to purchase certain
services from the MISO at incremental cost rather than MISO's full tariff rates.
The FERC also ordered the MISO to return the exit fee paid by Ameren to leave
the MISO, provided Ameren returns to the MISO and agrees to pay its proportional
share of the startup and ongoing operational expenses of the MISO. Moreover, the
FERC required the Alliance companies to select the RTO in which they will
participate within thirty days of the order.
Since the April 2002 FERC order, our affiliates, AmerenUE and AmerenCIPS
made filings with the FERC indicating that they would return to the MISO and
that membership would be through a new independent transmission company,
GridAmerica LLC, that was agreed to be formed by AmerenUE and AmerenCIPS, and
subsidiaries of FirstEnergy Corporation and NiSource Inc. Pending FERC approval
of the definitive agreements establishing GridAmerica, National Grid will serve
as the managing member of GridAmerica and will manage the transmission assets of
the three companies and participate in the MISO on behalf of GridAmerica. Other
Alliance RTO companies announced their intentions to join the Pennsylvania -
Jersey - Maryland (PJM) RTO. On July 25, 2002, the Ameren companies filed a
motion with the FERC requesting that it condition the approval of the choices of
other Illinois utilities to join the PJM RTO on MISO and PJM entering into an
agreement addressing important reliability and rate-barrier issues. On July 31,
2002, the FERC issued an order accepting the formation of GridAmerica as an
independent transmission company under the MISO subject to further compliance
filings ordered by the FERC. The FERC also issued an order accepting the
elections made by the other Illinois utilities to join the PJM RTO on the
condition PJM and MISO immediately begin a process to address the reliability
and rate-barrier issues raised by Ameren companies and other market participants
in previous filings.
We do not own transmission assets. However, we pay AmerenUE and AmerenCIPS
for the use of their transmission lines to transmit power. Until the reliability
and rate-barrier issues are resolved as ordered by the FERC, and the tariffs and
other material terms of Ameren's participation in GridAmerica, and GridAmerica's
participation in the MISO, are finalized and approved by the FERC, Ameren is
unable to predict whether the Ameren companies will in fact become a member of
GridAmerica or MISO, or the impact that on-going RTO developments will have on
the financial condition, results of operation or liquidity of it or its
subsidiaries, including us.
8
NOTE 3 - Related Party Transactions
We have transactions in the normal course of business with Ameren
Corporation, our parent company, and certain of its subsidiaries. These
transactions primarily consist of power purchases and sales, services received
or rendered, borrowings and lendings. The transactions with these affiliates are
reported as intercompany transactions.
Electric Power Supply Agreements
An electric power supply agreement was entered into between us and
Marketing Co. (Genco-Marketing Co. agreement). Marketing Co. entered into an
electric power supply agreement with AmerenCIPS (Marketing Co.-CIPS agreement)
to supply sufficient power to meet AmerenCIPS' native load requirements. A
portion of the capacity and energy supplied by us to Marketing Co. is resold to
AmerenCIPS for resale. The portion of these sales to AmerenCIPS that is used for
resale to native load customers is at rates (which approximate the historical
regulated rates for generation) specified by the Illinois Commerce Commission
(ICC). The portion of the sales to AmerenCIPS resold to those retail customers
allowed choice of an electric supplier under state law is at fixed market-based
prices. Other capacity and energy purchased by Marketing Co. from us will be
used by Marketing Co. to serve its obligations under various long-term wholesale
contracts it assumed from AmerenCIPS and other long-term wholesale and retail
contracts Marketing Co. has, or will, enter into. The Marketing Co.-CIPS
agreement expires December 31, 2004 and the Genco-Marketing Co. agreement may be
terminated upon at least one year's notice given by either party, but in no
event can it be terminated prior to December 31, 2004. As a result of the
extension through January 1, 2007 of the electric rate freeze related to the
Illinois Law, AmerenCIPS expects to seek to renew or extend the Marketing
Co.-CIPS agreement through the same period. A renewal or extension of the
Marketing Co.-CIPS agreement will depend on compliance with regulatory
requirements in effect at the time, and we cannot predict whether AmerenCIPS
will be successful in securing a renewal or extension of this agreement.
Electric revenues derived under the Genco-Marketing Co. agreement were $149
million for the three months ended June 30, 2002 (2001 - $134 million) and $296
million for the six months ended June 30, 2002 (2001 - $272 million). No other
customer represents greater than 10% of our revenues.
Joint Dispatch Agreement
We jointly dispatch generation with AmerenUE under an amended joint
dispatch agreement. Under the amended agreement, both of us are entitled to
serve our load requirements from our own least-cost generation first, and then
allow the other company access to any available excess generation. All of our
sales to Marketing Co. are considered load requirements. Sales made by us to
other customers through AmerenEnergy, as our agent, are not considered load
requirements. Electric revenues derived through sales of available generation
through AmerenEnergy were $59 million for the three months ended June 30, 2002
(2001 - $67 million) and $163 million for the six months ended June 30, 2002
(2001 - $125 million). Electric revenues derived through sales of available
generation to AmerenUE through the amended joint dispatch agreement were $8
million for the three months ended June 30, 2002 (2001 - $6 million) and $18
million for the six months ended June 30, 2002 (2001 - $14 million).
Intercompany power purchases from the amended joint dispatch agreement
between AmerenUE and us and other agreements for the three and six months ended
June 30, 2002 were $15 million and $35 million compared to $13 million and $41
million in the prior year comparable periods.
Ameren Services and AmerenEnergy Charges
Support services provided by our affiliates, Ameren Services Company and
AmerenEnergy, including wages, employee benefits, professional services and
other expenses are based on actual costs incurred. Other operating expenses
provided by Ameren Services and AmerenEnergy, for the three and six months ended
June 30, 2002, were $9 million and $18 million compared to $7 million and $17
million for the comparable prior year periods.
9
Other
Our gross margins from power supply contracts with affiliated companies
continue to be the principal source of cash from operating activities. We plan
to utilize short-term debt to support normal operations and other temporary
capital requirements. We have the ability to borrow up to $500 million from
Ameren through a non-utility money pool agreement. However, the total amount
available to us at any time is reduced by the amount of borrowings from Ameren
by our affiliates and is increased to the extent other Ameren non-regulated
companies advance surplus funds to the non-utility money pool or external
borrowing sources are used by Ameren to increase the available amounts. At June
30, 2002, $400 million was available through the non-utility money pool not
including additional funds available through invested cash balances at Ameren
Corporation and uncommitted bank lines. The non-utility money pool was
established to coordinate and provide for short-term cash and working capital
requirements of Ameren's non-regulated activities and is administered by Ameren
Services. Interest is calculated at varying rates of interest depending on the
composition of internal and external funds in the non-utility money pool. The
average interest rate for borrowings from the non-utility money pool was 8.34%
in the second quarter of 2002 (2001 - 4.44%) and 6.33% for the six months ended
June 30, 2002 (2001 - 5.20%). We incurred approximately $4 million in net
intercompany interest expense associated with outstanding borrowings from the
non-utility money pool in the second quarter of 2002 and $5 million for the six
months ended June 30, 2002. We received approximately $1 million in intercompany
interest income associated with outstanding loans to the non-utility money pool
in the second quarter of 2001 compared to $3 million for the six months ended
June 30, 2001. At June 30, 2002, we had loaned $33 million to the non-utility
money pool and had no outstanding borrowings.
NOTE 4 - Derivative Financial Instruments
Derivative Financial Instruments
We, which includes AmerenEnergy acting as agent on our behalf, utilize
derivatives principally to manage the risk of changes in market prices for fuel,
electricity and emission credits. Price fluctuations in fuel and electricity
cause:
o an unrealized appreciation or depreciation of our firm commitments to
purchase or sell when purchase or sales prices under the firm
commitment are compared with current commodity prices;
o market values of fuel or purchased power to differ from the cost of
those commodities in inventory or under the firm commitment; and
o actual cash outlays for the purchase of these commodities, in certain
circumstances, to differ from anticipated cash outlays.
The derivatives that we use to hedge these risks are dictated by risk
management policies and include forward contracts, futures contracts, options
and swaps. We continually assess our supply and delivery commitment positions
against forward market prices and internal forecasts of forward prices. We
actively manage our exposure to power price risk through our power risk
management program carried out under our risk management guidelines to modify
our exposure to market, credit and operational risk by entering into various
offsetting transactions. In general, we believe these transactions serve to
reduce our price risk.
In addition, we may purchase additional megawatts, again within risk
management guidelines, in anticipation of future price changes. Certain
derivative contracts we enter into on a regular basis as part of our power risk
management program do not qualify for hedge accounting or the normal purchase,
normal sale exception under SFAS 133. Accordingly, these contracts are recorded
at fair value with changes in the fair value charged or credited to the income
statement in the period in which the change occurred. Contracts we enter into as
part of our power risk management program may be settled by either physical
delivery or financially settled with the counterparty. See Note 1 - "Summary of
Significant Accounting Policies."
As of June 30, 2002, we have recorded the fair value of derivative
financial instrument assets of $8 million in Other Assets and the fair value of
derivative financial instrument liabilities of $8 million in Other Deferred
Credits and Liabilities.
10
Cash Flow Hedges
We routinely enter into forward purchase and sales contracts for
electricity based on forecasted levels of economic generation in excess of load
requirements. The relative balance between load and economic generation varies
throughout the year. The contracts typically cover a period of twelve months or
less. The purpose of these contracts is to hedge against possible price
fluctuations in the spot market for the period covered under the contracts. We
formally document all relationships between hedging instruments and hedged
items, as well as our risk management objective and strategy for undertaking
various hedge transactions. The mark-to-market value of cash flow hedges will
continue to fluctuate with changes in market prices up to contract expiration.
The pretax net gain or loss on power forward derivative instruments, which
represented the impact of discontinued cash flow hedges, the ineffective portion
of cash flow hedges, as well as the reversal of amounts previously recorded in
OCI due to transactions going to delivery or settlement, was approximately a $1
million loss for the three months ended June 30, 2002 and approximately a $1
million gain for the six months ended June 30, 2002. For the three and six
months ended June 30, 2001, the above related amounts were approximately a $1
million loss and a $3 million gain, respectively.
As of June 30, 2002, we had hedged a portion of the price exposure related
to the relative balance between load and economic generation for the upcoming
twelve month period. The mark-to-market value accumulated in OCI for the
effective portion of hedges of electricity price exposure is a net loss of
approximately $2 million ($1 million, net of taxes).
As of June 30, 2002, a gain of approximately $6 million ($3 million, net of
taxes) associated with interest rate swaps was included in OCI. The swaps were a
partial hedge of the interest rate on debt that was issued in June 2002. The
swaps covered the first ten years of debt that has a 30-year maturity and the
gain in OCI is being amortized over a ten-year period beginning in June 2002.
NOTE 5 - Debt
In June 2002, we issued $275 million of 7.95% Senior Notes due June 1, 2032
in a Rule 144A private placement. Interest is payable semi-annually on June 1
and December 1 of each year, beginning December 1, 2002. We received net
proceeds of $271 million, after debt discount and underwriters' fees, that were
used to reduce short-term borrowings and for general corporate purposes. The
Senior Notes limit our ability to, among other things, sell assets, create
liens, and engage in mergers, consolidations or similar transactions. In
addition, the Senior Notes include transitional covenants that limit our ability
to incur indebtedness and pay dividends or make certain other restricted
payments. We are currently in compliance with all covenants relating to this
debt as well as to other outstanding debt.
Amortization of debt issuance costs and discounts for the three and six
months ending June 30, 2002 and 2001 of less than $1 million were included in
interest expense in the income statement.
NOTE 6 - CILCORP Acquisition
On April 28, 2002, Ameren entered into an agreement with The AES
Corporation to purchase all of the outstanding stock of CILCORP Inc. CILCORP is
the parent company of Peoria-based Central Illinois Light Company, which
operates as CILCO. Ameren also agreed to acquire AES Medina Valley (No. 4),
L.L.C. which indirectly owns a 40 megawatt, gas-fired electric generation plant.
The total purchase price is approximately $1.4 billion, subject to adjustment
for changes in CILCORP's working capital, and includes the assumption of CILCORP
and AES Medina Valley debt at closing, estimated at approximately $900 million,
with the balance of the purchase price in cash. Ameren expects to finance a
significant portion of the cash component of the purchase price through the
issuance of new common equity.
The purchase will include CILCORP's regulated natural gas and electric
businesses in Illinois serving approximately 205,000 and 200,000 customers,
respectively, of which approximately 150,000 are combination electric and gas
customers. In addition, the purchase includes approximately 1,200 megawatts of
largely coal-fired generating capacity, most of which is expected to be
non-regulated by closing. Ameren currently does not plan to transfer any portion
of this non-regulated generating capacity to us.
11
Upon completion of the acquisition, expected by March 2003, CILCO will
become an Ameren subsidiary, but will remain a separate utility company,
operating as AmerenCILCO. The transaction is subject to the approval of the
Illinois Commerce Commission, the SEC, the FERC, the expiration of the waiting
period under the Hart-Scott-Rodino Act, the Federal Communication's Commission
and other customary closing conditions.
For the period ended December 31, 2001, CILCORP had revenues of $815
million, operating income of $126 million, and net income from continuing
operations of $28 million, and as of December 31, 2001 had total assets of $1.8
billion.
12
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
OVERVIEW
AmerenEnergy Generating Company, is an indirect wholly-owned subsidiary of
Ameren Corporation that owns and operates a wholesale electric generation
business in Missouri and Illinois. Much of our business was formerly owned and
operated by our affiliate, Central Illinois Public Service Company, which
operates as AmerenCIPS. We were incorporated in the State of Illinois in March
2000. On May 1, 2000, we acquired from AmerenCIPS at net book value five
coal-fired electric generating stations which we refer to as the coal plants,
all related fuel, supply, transportation, maintenance and labor agreements,
approximately 45% of AmerenCIPS' employees, and other related rights, assets and
liabilities.
Ameren is a holding company registered under the Public Utility Holding
Company Act of 1935 (PUHCA). Its principal business is the generation,
transmission and distribution of electricity, and the distribution of natural
gas to residential, commercial, industrial and wholesale users in the central
United States. In addition to us, its primary subsidiaries are as follows:
o Union Electric Company, which operates a regulated electric
generation, transmission and distribution business, and a regulated
natural gas distribution business in Missouri and Illinois as
AmerenUE.
o AmerenCIPS, which operates a regulated electric and natural gas
distribution business in Illinois.
o AmerenEnergy Resources Company (Resources Company), which consists of
non-regulated operations. Its principal subsidiaries include us,
AmerenEnergy Marketing Company (Marketing Company) which markets power
for periods over one year, AmerenEnergy Fuels and Services Company
(Fuels Company), which procures fuel and natural gas and manages the
related risks for us and our affiliates, and AmerenEnergy Development
Company (Development Company), which, as our parent, develops and
constructs generating facilities for us.
o AmerenEnergy, Inc. (AmerenEnergy), which serves as a power marketing
and risk management agent for us and our affiliates for transactions
of less than one year.
o Ameren Services Company (Ameren Services), which provides shared
support services to us and our affiliates.
You should read the following discussion and analysis in conjunction
with:
o The financial statements and related notes included in this Quarterly
Report on Form 10-Q.
o The audited financial statements and related notes that are included
in our Annual Report on Form 10-K for the period ended December 31,
2001.
o Management's Discussion and Analysis of Financial Condition and
Results of Operations that is included in our Annual Report on Form
10-K for the period ended December 31, 2001.
When we refer to our, we or us, we are referring to AmerenEnergy Generating
Company and in some cases our agents, AmerenEnergy and Fuels Company. All dollar
amounts are in millions, unless otherwise indicated.
Our results of operations and financial position are impacted by many
factors, including both controllable and uncontrollable factors. Weather,
economic conditions, and the actions of key customers or competitors can
significantly impact the demand for our services. Our results are also impacted
by seasonal fluctuations caused by winter heating, and summer cooling, demand.
We principally utilize coal and natural gas in our operations. The prices for
these commodities can fluctuate significantly due to the world economic and
political environment, weather, production levels and many other factors. We
employ various risk management strategies in order to try to reduce our exposure
to commodity risks and other risks inherent in our business. The reliability of
our power plants, and the level of operating and administrative costs and
capital investment are key factors that we seek to control in order to optimize
our results of operations, cash flows and financial position.
RESULTS OF OPERATIONS
Summary
Our net income decreased to $2 million in the second quarter of 2002 from
$12 million in the second quarter of 2001. Net income for the six months ended
June 30, 2002 decreased to $15 million compared to the year-ago earnings of $25
million. The decrease in both periods was primarily due to increases in other
13
operation costs primarily associated with increases in workers' compensation,
pension and healthcare costs coupled with increased costs for efficiency
improvements made at our power plants (second quarter - $2 million; year to date
- - $5 million), increases in depreciation and other taxes associated with
additional combustion turbine generating units added since the second quarter of
2001 (second quarter - $4 million; year to date - $7 million), higher interest
costs associated with borrowing more funds at higher interest rates to finance
operations (second quarter - $2 million; year to date - $1 million). These cost
increases were partially offset by increases in electric margin (second quarter
- - $2 million; year to date - $5 million) due primarily to increases in sales to
new and existing wholesale customers. In the first quarter of 2001 we recorded a
charge of $2 million due to the adoption of Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities."
Recent Developments
On April 28, 2002, Ameren entered into an agreement with The AES
Corporation to purchase all of the outstanding stock of CILCORP Inc. CILCORP is
the parent company of Peoria-based Central Illinois Light Company, which
operates as CILCO. Ameren also agreed to acquire AES Medina Valley (No. 4),
L.L.C. which indirectly owns a 40 megawatt, gas-fired electric generation plant.
The total purchase price is approximately $1.4 billion, subject to adjustment
for changes in CILCORP's working capital, and includes the assumption of CILCORP
and AES Medina Valley debt at closing, estimated at approximately $900 million,
with the balance of the purchase price in cash. Ameren expects to finance a
significant portion of the cash component of the purchase price through the
issuance of new common equity.
The purchase will include CILCORP's regulated natural gas and electric
businesses in Illinois serving approximately 205,000 and 200,000 customers,
respectively, of which approximately 150,000 are combination electric and gas
customers. In addition, the purchase includes approximately 1,200 megawatts of
largely coal-fired generating capacity, most of which is expected to be
non-regulated by closing. Ameren currently does not plan to transfer any portion
of this non-regulated generating capacity to us.
Upon completion of the acquisition, expected by March 2003, CILCO will
become an Ameren subsidiary, but will remain a separate utility company,
operating as AmerenCILCO. The transaction is subject to the approval of the
Illinois Commerce Commission, the Securities and Exchange Commission (SEC), the
Federal Energy Regulatory Commission (FERC), the expiration of the waiting
period under the Hart-Scott-Rodino Act, the Federal Communication's Commission
and other customary closing conditions.
For the period ended December 31, 2001, CILCORP had revenues of $815
million, operating income of $126 million, and net income from continuing
operations of $28 million, and as of December 31, 2001 had total assets of $1.8
billion.
In April 2002, as a result of AmerenUE's then pending Missouri electric
earnings complaint case and the CILCORP transaction and related assumption of
debt, credit rating agencies placed Ameren Corporation's debt under review for
possible downgrade or negative credit watch. Standard & Poor's placed the
ratings of AmerenUE and AmerenCIPS debt on negative credit watch and placed the
ratings of our debt on positive credit watch. However, Standard & Poor's stated
they expect the corporate credit ratings of Ameren and its subsidiaries to be in
the "A" rating category following completion of the acquisition. Moody's
Investor Service stated they envisioned a one notch downgrade of Ameren's
issuer, senior unsecured debt and commercial paper ratings. Ameren's corporate
credit rating is A+ at Standard & Poor's and its rating is A2 at Moody's, while
our credit rating is BBB+ at Standard and Poor's and A3 at Moody's. In July,
AmerenUE settled its electric earnings complaint case. The rating agencies have
not changed the assignment of negative watch, review for possible downgrade or
negative outlook to any of the ratings nor have the ratings themselves changed.
Any adverse change in Ameren's or its subsidiaries' ratings may reduce our
access to capital and/or increase the costs of borrowings resulting in a
negative impact on earnings.
14
Electric Operations
The following table represents the favorable (unfavorable) variation for
the three and six months ended June 30, 2002 from the comparable period in 2001:
- --------------------------------------------------------------------------------
Three Months Six Months
- --------------------------------------------------------------------------------
Electric Revenues:
Wholesale revenues..................... $ 15 $ 24
Interchange revenues................... (6) 42
- --------------------------------------------------------------------------------
9 66
Fuel and Purchased Power:
Fuel:
Generation........................... $ (13) $ (22)
Price................................ (2) (5)
Generation efficiencies and other.... 1 1
Purchased power........................ 8 (32)
- --------------------------------------------------------------------------------
(6) (58)
- --------------------------------------------------------------------------------
Change in electric margin $ 3 $ 8
- --------------------------------------------------------------------------------
Electric margins increased $3 million for the three months and $8 million
for the six months ended June 30, 2002 compared to year-ago periods, primarily
due to a net increase in new wholesale customers and an increase in sales to
existing wholesale customers due to warmer weather, an increase in volume of
interchange sales for the six months offset by lower margins on those sales due
to the deterioration of electricity prices, and an increase in the use of lower
cost generation stations due to better availability coupled with slightly higher
fuel costs. Electric revenues increased $9 million in the second quarter of 2002
and $66 million for the first six months of 2002 as we experienced a 25%
increase in electric kilowatthour sales for the second quarter and a 33%
increase year to date. The increases were primarily due to several new wholesale
electric customers added by Marketing Co. which contributed an additional $15
million of electric revenues for the quarter and $24 million year to date. For
the first six months of 2002, interchange sales and related purchased power
increased due to an increase in interchange sales by AmerenUE and AmerenEnergy.
However, we realized lower margins on these sales compared to the prior year due
to lower wholesale electricity prices. Purchased power was reduced in the second
quarter compared to the prior year comparable quarter due to fewer forced and
maintenance outages at our coal-fired power stations.
Other Operating Expenses
Other operations related to operating expenses increased $4 million in the
second quarter of 2002 and $8 million in the first six months of 2002, compared
to the year-ago periods, primarily due to higher injuries and damages costs,
costs for efficiency improvements made at the coal-fired generating stations,
increases in employee benefit costs related to the investment performance of
pension plan assets and increasing healthcare costs. These increases were
partially offset by a $2 million decrease in incentive compensation and
severance costs.
Maintenance expenses increased $3 million in the second quarter of 2002 and
$3 million in the first six months of 2002, compared to the year-ago periods,
primarily due to a fire restoration project at our Hutsonville coal-fired power
plant coupled with incremental increases associated with the new combustion
turbine generating units added during the second, third and fourth quarters of
2001, offset by fewer forced and maintenance outages at the coal-fired power
plants during the second quarter of 2002 as compared to 2001. The Hutsonville
fire damaged one of its two operating units and was restored to operational
status within seven weeks.
Depreciation and amortization expense increased $4 million in the second
quarter of 2002 and $9 million in the first six months of 2002, compared to the
year-ago periods, primarily due to an increase in depreciable property related
to the new combustion turbine generating units added during the second, third
and fourth quarters of 2001.
Other taxes expense increased $2 million in the second quarter and first
six months of 2002, compared to the year-ago periods, primarily due to increased
property taxes associated with the new combustion
15
turbine generating units added in the prior year offset by adjustments related
to property tax rates in the prior year.
Interest Expense
Interest expense increased $4 million in the second quarter of 2002 and $2
million in the first six months of 2002, compared to the year-ago periods,
primarily due to borrowing more funds from the money pool at higher interest
rates and interest associated with the issuance of $275 million of 7.95% Senior
Notes in June 2002. These increases were partially offset by a reduction in the
principal amounts outstanding on our subordinated intercompany promissory notes
to AmerenCIPS and Ameren, therefore reducing interest costs in the current year
compared to the prior year corresponding periods. Amortization of debt issuance
costs and discounts for the three and six months ending June 30, 2002 and 2001
of less than $1 million were included in interest expense in the income
statement.
LIQUIDITY AND CAPITAL RESOURCES
Operating
Our net cash flows provided by operating activities decreased $53 million
to $68 million in the first six months of 2002, compared to the year-ago period.
Net cash flows from operations decreased principally due to a decrease in
earnings ($10 million), a decrease in accounts and wages payable, including
intercompany ($178 million), and accounts receivable, including intercompany
($103 million) due to the timing of receipt of payments to and from our
affiliates and a decrease in materials and supplies ($23 million) associated
with decreased coal inventories. Materials and supplies were lower than normal
at December 31, 2000 coupled with the need to increase natural gas inventories
to fuel the new combustion turbine generating units put in service since April
2001. Materials and supplies were also higher than normal at December 31, 2001,
due to the warm winter and anticipation of a potential coal supply disruption
that did not occur.
Our gross margins from power supply contracts with affiliated companies
continue to be the principal source of cash from operating activities. We plan
to utilize short-term debt to support normal operations and other temporary
capital requirements. We have the ability to borrow up to $500 million from
Ameren through a non-utility money pool agreement. However, the total amount
available to us at any time is reduced by the amount of borrowings from Ameren
by our affiliates and is increased to the extent other Ameren non-regulated
companies advance surplus funds to the non-utility money pool or external
borrowing sources are used by Ameren to increase the available amounts. At June
30, 2002, $400 million was available through the non-utility money pool not
including additional funds available through invested cash balances at Ameren
Corporation and uncommitted bank lines. The non-utility money pool was
established to coordinate and provide for short-term cash and working capital
requirements of Ameren's non-regulated activities and is administered by Ameren
Services. Interest is calculated at varying rates of interest depending on the
composition of internal and external funds in the non-utility money pool. The
average interest rate for borrowings from the non-utility money pool was 8.34%
in the second quarter of 2002 (2001 - 4.44%) and 6.33% for the six months ended
June 30, 2002 (2001 - 5.20%). We incurred approximately $4 million in net
intercompany interest expense associated with outstanding borrowings from the
non-utility money pool in the second quarter of 2002 and $5 million for the six
months ended June 30, 2002. We received approximately $1 million in intercompany
interest income associated with outstanding loans to the non-utility money pool
in the second quarter of 2001 compared to $3 million for the six months ended
June 30, 2001. At June 30, 2002, we had loaned $33 million to the non-utility
money pool and had no outstanding borrowings.
Our financial agreements include customary default provisions that could
impact the continued availability of credit or result in the acceleration of
repayment. These events include bankruptcy, defaults in payment of other
indebtedness, certain judgments that are not paid or insured, or failure to meet
or maintain covenants. It is also an event of default under our outstanding
senior notes if one or more payments aggregating $25 million or more due to us
from Marketing Company are not made within 60 days of the date they are due. At
June 30, 2002, we were in compliance with these provisions.
16
Investing
Our cash flows used in investing activities increased $147 million to $223
million for the first six months of 2002, compared to the year-ago period,
primarily due to our contribution of excess funds generated by recent financings
to Ameren's non-utility money pool versus our need for these funds in the prior
year. In addition, we had an increase in construction expenditures for new
combustion turbine generating units and upgrades to existing coal-fired
generating plants in both periods. Of the $190 million of construction
expenditures incurred during the first six months of 2002, approximately $140
million was paid to Development Company for a combustion turbine generating unit
purchased in December 2001, but the amount was included in accounts payable at
December 31, 2001 resulting in approximately $50 million of construction
expenditures during the first six months of 2002.
Future Capacity Additions
Of the $300 million of budgeted capital expenditures for 2002, which
excludes the December 2001 purchase referenced above, $222 million relates to
the scheduled purchase from Development Company of four combustion turbine
generating units located in Elgin, Illinois. These combustion turbine generating
units, which are expected to be purchased in the third and fourth quarters of
2002, are designed to provide additional capacity of 468 megawatts. Annual
capital expenditures at our coal plants are expected to range from approximately
$225 million to $275 million in total for the period 2002 through 2006,
excluding any capital expenditures required to comply with NOx emission
standards.
Financing
Our cash flows provided by financing activities was $161 million in the
first six months of 2002, compared to cash flows used in financing activities of
$44 million in the year-ago comparable period. Our principal financing
activities for 2002 included the issuance of $275 million of 7.95% Senior Notes
due June 1, 2032. Interest is payable semi-annually on June 1 and December 1 of
each year, beginning December 1, 2002. We received net proceeds of $271 million,
after debt discount and underwriters' fees, that were used to reduce short-term
borrowings and for general corporate purposes.
In the ordinary course of business, we evaluate several strategies to
enhance our financial position, earnings, and liquidity. These strategies may
include potential acquisitions, divestitures, opportunities to reduce costs or
increase revenues, and other strategic initiatives in order to increase
shareholder value. We are unable to predict which, if any, of these initiatives
will be executed, as well as the impact these initiatives may have on our future
financial position, results of operations or liquidity.
We are considering selling up to 500 megawatts of our existing combustion
turbine generating units. Our affiliate, AmerenUE, has expressed interest in
purchasing combustion turbine generating units from us. Any such transaction
involving the sale or transfer of these assets and the use of proceeds therefrom
between our affiliate and us would be recorded at net book value and would be
subject the terms and conditions of our borrowing agreements.
Electric Industry Restructuring and Regulatory Matters
Illinois
See Note 2 - "Rate and Regulatory Matters" to our financial statements.
Federal - Regional Transmission Organizations
See Note 2 - "Rate and Regulatory Matters" to our financial statements.
17
ACCOUNTING MATTERS
Critical Accounting Policies
Preparation of the financial statements and related disclosures in
compliance with generally accepted accounting principles requires the
application of appropriate technical accounting rules and guidance, as well as
the use of estimates. Our application of these policies involves judgments
regarding many factors, which, in and of themselves, could materially impact the
financial statements and disclosures. A future change in assumptions or
judgments applied in determining the following matters, among others, could have
a material impact on future financial results. In the table below, we have
outlined those accounting policies that we believe are most difficult,
subjective or complex:
Accounting Policy Uncertainties Affecting Application
- ----------------- -----------------------------------
Environmental Costs
We accrue for all known environmental o Extent of contamination
contamination where remediation can be o Responsible party determination
reasonably estimated. However, we are o Approved methods for cleanup
contractually indemnified by AmerenCIPS for o Present and future legislation and governmental
remediation costs that we incur at the sites of regulations and standards
our coal plants relating to environmental o Results of ongoing research and development
contamination that occurred prior to the regarding environmental impacts
AmerenCIPS' transfer of the coal plants to us on
May 1, 2000.
Basis for Judgment
We determine the proper amounts to accrue for environmental contamination based
on internal and third party estimates of clean-up costs in the context of
current remediation regulation standards and available technology.
Benefit Plan Accounting
Based on actuarial calculations, we accrue costs o Future rate of return on pension and other plan assets
of providing future employee benefits in o Interest rates used in valuing benefit obligations
accordance with SFAS 87, 106 and 112. See Note o Healthcare cost trend rates
6 to our financial statements for the year ended
December 31, 2001.
Basis for Judgment
We utilize a third party consultant to assist us in evaluating and recording the
proper amount for future employee benefits. Our ultimate selection of the
discount rate, healthcare trend rate and expected rate of return on pension
assets is based on our review of available current, historical and projected
rates, as applicable.
Derivative Financial Instruments
We record all derivatives at their fair market
value in accordance with SFAS 133. The
identification and classification of a o Market conditions in the energy industry, especially
derivative, and the fair value of such the effects of price volatility on contractual
derivative must be determined. See Note 3 to commodity commitments
our financial statements for the year ended o Regulatory and political environments and
December 31, 2001 and Note 4 - "Derivative requirements
Financial Instruments" to our financial o Fair value estimations on longer term contracts
statements.
18
Basis for Judgment
We determine whether a transaction is a derivative versus a normal purchase or
sale based on historical practice and our intention at the time we enter a
transaction. We utilize actively quoted prices, prices provided by external
sources, and prices based on internal models, and other valuation methods to
determine the fair market value of derivative financial instruments.
Impact of Future Accounting Pronouncements
See Note 1 - "Summary of Significant Accounting Policies" to our financial
statements.
ITEM 3. Quantitative And Qualitative Disclosures About Market Risk.
Market risk represents the risk of changes in value of a physical asset or
a financial instrument, derivative or non-derivative, caused by fluctuations in
market variables (e.g., interest rates, etc.). The following discussion of our
risk management activities includes "forward-looking" statements that involve
risks and uncertainties. Actual results could differ materially from those
projected in the "forward-looking" statements. AmerenEnergy and Fuels Company,
on our behalf, manage our market risks in accordance with established policies,
which may include entering into various derivative transactions. In the normal
course of business, we also face risks that are either non-financial or
non-quantifiable. Such risks principally include business, legal, and
operational risk and are not represented in the following analysis.
Our risk management objective is to optimize our physical generating assets
within prudent risk parameters. Our risk management policies are set by a Risk
Management Steering Committee, which is comprised of senior-level Ameren
officers.
Interest Rate Risk
We are exposed to market risk through changes in interest rates associated
with our issuance of both variable rate and fixed rate debt. We manage our
interest rate exposure by controlling the amount of these instruments we hold
within our total capitalization portfolio and by monitoring the effects of
market changes in interest rates. At June 30, 2002, we had no variable rate
non-utility money pool borrowings outstanding.
Fuel Price Risk
100% of the required 2002 supply of coal for our coal power plants has been
acquired at fixed prices. As such, we have minimal coal price risk for 2002. In
addition, approximately 73% of our coal requirements from 2003 through 2006 are
covered by contracts.
Fair Value of Contracts
We utilize derivatives principally to manage the risk of changes in market
prices for natural gas, fuel, electricity and emission credits. Price
fluctuations in natural gas, fuel and electricity cause:
o an unrealized appreciation or depreciation of our firm commitments to
purchase or sell when purchase or sale prices under the firm commitment are
compared with current commodity prices;
o market values of fuel and natural gas inventories or purchased power to
differ from the cost of those commodities in inventory and under firm
commitment; and
o actual cash outlays for the purchase of these commodities to differ from
anticipated cash outlays.
The derivatives that we use to hedge these risks are dictated by risk
management policies and include forward contracts, futures contracts, options
and swaps. We continually assess our supply and delivery commitment positions
against forward market prices and internally forecast forward prices and modify
our exposure to market, credit and operational risk by entering into various
offsetting transactions. In general, we believe these transactions serve to
reduce our price risk. See Note 4 - "Derivative Financial Instruments" for more
information.
19
The following summarizes changes in the fair value of all contracts marked
to market during the three and six months ended June 30, 2002:
- ------------------------------------------------------------------------------------------------------------------
Three Six
months months
- ------------------------------------------------------------------------------------------------------------------
Fair value of contracts at beginning of period, net $ (1) $ 2
Contracts which were realized or otherwise settled during the three and six months
ended June 30, 2002 (2) (2)
Changes in fair values attributable to changes in valuation techniques and assumptions - -
Fair value of new contracts entered into during the three and six months ended
June 30, 2002 - (a)
Other changes in fair value 3 (a)
- ------------------------------------------------------------------------------------------------------------------
Fair value of contracts outstanding at June 30, 2002, net $ (a) $ (a)
- ------------------------------------------------------------------------------------------------------------------
(a) Less than $1 million.
Maturities of contracts as of June 30, 2002 were as follows:
- ------------------------------------------------------------------------------------------------------------------
Maturity Maturity
less than Maturity Maturity in excess Total fair
Sources of fair value (In Millions) 1 year 1-3 years 4-5 years of 5 years value (a)
- ------------------------------------------------------------------------------------------------------------------
Prices actively quoted $ -- $ -- $ -- $ -- $ --
Prices provided by other external sources
(b) (d) -- -- -- (d)
Prices based on models and other valuation
methods (c) (d) -- -- -- (d)
- -------------------------------------------------------------------------------------------------------------------
Total $ (d) $ -- $ -- $ -- $ (d)
- -------------------------------------------------------------------------------------------------------------------
(a) Contracts valued at less than $1 million were with both investment grade and noninvestment-grade
rated counterparties.
(b) Principally power forward hedges valued based on NYMEX prices for over-the-counter contracts.
(c) Principally power forwards valued based on information from external sources and our estimates.
(d) Less than $1 million.
SAFE HARBOR STATEMENT
Statements made in this report which are not based on historical facts, are
"forward-looking" and, accordingly, involve risks and uncertainties that could
cause actual results to differ materially from those discussed. Although such
"forward-looking" statements have been made in good faith and are based on
reasonable assumptions, there is no assurance that the expected results will be
achieved. These statements include (without limitation) statements as to future
expectations, beliefs, plans, strategies, objectives, events, conditions and
financial performance. In connection with the "Safe Harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we are providing this
cautionary statement to identify important factors that could cause actual
results to differ materially from those anticipated. The following factors, in
addition to those discussed elsewhere in this report and in the 2001 Annual
Report on Form 10-K for the year ended December 31, 2001, and in subsequent
securities filings, could cause results to differ materially from management
expectations as suggested by such "forward-looking" statements:
o the effects of AmerenUE's excess earnings complaint case and other
regulatory actions, including changes in regulatory policy;
o changes in laws and other governmental actions, including monetary and
fiscal policies;
o the impact on us of current regulations related to the opportunity for
customers to choose alternative energy suppliers in Illinois;
o the effects of increased competition in the future;
o the effects of Ameren's participation in a FERC approved Regional
Transmission Organization (RTO), including activities associated with
the Midwest Independent System Operator;
o availability and future market prices for fuel and purchased power,
electricity, and natural gas, including the use of financial and
derivative instruments and volatility of changes in market prices;
o wholesale and retail pricing for electricity in the Midwest;
20
o business and economic conditions;
o the impact of the adoption of new accounting standards;
o interest rates and the availability of capital;
o actions of rating agencies and the effects of such actions;
o weather conditions;
o generation plant construction, installation, and performance;
o the effects of strategic initiatives, including acquisitions and
divestitures;
o the impact of current environmental regulations on generating
companies and the expectation that more stringent requirements will be
introduced over time, which could potentially have a negative
financial effect;
o future wages and employee benefits costs;
o disruptions of the capital markets or other events making Ameren's and
our access to necessary capital more difficult or costly;
o competition from other generating facilities including new facilities
that may be developed in the future;
o cost and availability of transmission capacity for the energy
generated by our generating facilities or required to satisfy energy
sales made on our behalf; and
o legal and administrative proceedings.
21
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
On April 26, 2002, we received a notice of violation from the Illinois
Environmental Protection Agency (IEPA) concerning the alleged improper disposal
of bottom ash and slag materials originally from our Coffeen Power Plant and
sold to an off-site facility. We sold the material to an independent third party
who in turn resold the material to U.S. Minerals for use in the manufacture of
building materials and industrial abrasives. We believe that the notice of
violation is without merit and that our sale and/or use of coal combustion
by-products is specifically authorized under the Illinois Environmental
Protection Act. IEPA also issued a notice of violation to U.S. Minerals alleging
the improper handling, storage and disposal of the coal combustion materials. We
believe that the final disposition of this matter will not have a material
adverse effect on our financial position, results of operation or liquidity.
On July 30, 2002, the Illinois Attorney General's Office advised us that it
would be commencing an enforcement action concerning an inactive waste disposal
site near Coffeen, Illinois, which is the location of a disposal facility
permitted by the IEPA to receive fly ash from our Coffeen power plant. The
Illinois Attorney General also notified the disposal facility's current and
former owners as to the proposed enforcement action. The Attorney General
advised that it may initiate an action under CERCLA to recover past costs
incurred at the site ($322,000) and to obtain a declaratory judgment as to
liability for future costs. Neither us, the current owner of the Coffeen power
plant, nor AmerenCIPS, the prior owner of the Coffeen power plant, owned or
operated the disposal facility. We believe that this matter will not have a
material adverse effect on our financial position, results of operations or
liquidity.
ITEM 5. Other Information
The Audit Committee of the Board of Directors of Ameren has approved our
independent accountants, PriceWaterhouseCoopers, to perform the following audit
and non-audit services:
o Audits required by the federal, state or local government rules
o Audits of employee pension and benefits plans
o Income tax accounting and consulting projects
o Comfort letters and consents required to complete SEC filings and
issue securities
o Consultation on responses to accounting inquiries by regulatory or
other bodies
o Audit of AmerenEnergy earnings before interest and taxes statement
o Review of stock transfer agent and registrar internal controls
o Review of risk management internal controls
o Consultation on the accounting for corporate events and transactions
o Assistance with preparation of testimony for regulatory filings
ITEM 6. Exhibits and Reports on Form 8-K
(a)(i) Exhibits.
4.1 - Third Supplemental Indenture dated as of June 1, 2002
to Indenture dated as of November 1, 2001 from Ameren
Energy Generating Company to The Bank of New York, as
Trustee relating to Ameren Energy Generating Company's
7.95% Senior Notes, Series E due 2032 (including as
exhibit the form of Note).
4.2 - Registration Rights Agreement, dated June 6, 2002,
among Ameren Energy Generating Company and the Initial
Purchasers relating to Ameren Energy Generating
Company's 7.95% Senior Notes, Series E due 2032.
99.1 - Certificate of Chief Executive Officer required by
Section 906 of the Sarbanes-Oxley Act of 2002 (not
filed as a part of this Report on Form 10Q.)
99.2 - Certificate of Chief Financial Officer required by
Section 906 of the Sarbanes-Oxley Act of 2002 (not
filed as a part of this Report on Form 10Q.)
(a)(ii) Exhibits Incorporated by Reference.
10.1 - Memorandum of Understanding dated May 24, 2002 between
Ameren Services Company, as agent for AmerenUE and
AmerenCIPS, and the Midwest Indepen-
22
dent Transmission System Operator, Inc. (MISO) (June 30,
2002 Ameren Corporation Form 10-Q, Exhibit 10.2).
10.2 - Participation Agreement dated as of July 3, 2002 by and
among MISO, Ameren Services Company as agent for
AmerenUE and AmerenCIPS, FirstEnergy Corporation on
behalf of American Transmission Systems, Incorporated,
Northern Indiana Public Service Company and National
Grid USA (June 30, 2002 Ameren Corporation Form 10-Q,
Exhibit 10.2).
(b) Reports on Form 8-K. None.
Note: Reports of Ameren Corporation on Forms 8-K, 10-Q and 10-K are
on file with the SEC under File Number 1-14756.
Reports of Central Illinois Public Service Company on Forms
8-K, 10-Q and 10-K are on file with the SEC under File Number
1-3672.
Reports of Union Electric Company on Forms 8-K, 10-Q and 10-K
are on file with the SEC under the File Number 1-2967.
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMEREN ENERGY GENERATING COMPANY
(Registrant)
By /s/ Martin J. Lyons
----------------------------------
Martin J. Lyons
Controller
(Principal Accounting Officer)
Date: August 14, 2002
24
Exhibit 4.1
================================================================================
THIRD SUPPLEMENTAL INDENTURE
dated as of June 1, 2002
to
INDENTURE
dated as of November 1, 2000
AMEREN ENERGY GENERATING COMPANY
to
THE BANK OF NEW YORK, as Trustee
================================================================================
$275,000,000 7.95% Senior Notes, Series E Due 2032
THIRD SUPPLEMENTAL INDENTURE (the "Third Supplemental Indenture"), dated as
of June 1, 2002, to the Indenture, dated as of November 1, 2000 (the "Original
Indenture"), from AMEREN ENERGY GENERATING COMPANY, an Illinois corporation
(together with its successors and assigns, the "Issuer"), its principal office
and mailing address being at One Ameren Plaza, 1901 Chouteau Avenue, P.O. Box
66149, St. Louis, Missouri 63166-6149, to THE BANK OF NEW YORK, as trustee (the
"Trustee"), its office and mailing address being at 101 Barclay Street, New
York, New York 10286.
W I T N E S S E T H:
WHEREAS, the Issuer and the Trustee have heretofore executed and delivered
the Original Indenture to provide for the issuance from time to time of the
Issuer's Securities (as defined in the Original Indenture) to be issued in one
or more series;
WHEREAS, Sections 2.1 and 7.1 of the Original Indenture provide, among
other things, that the Issuer and the Trustee may enter into indentures
supplemental to the Original Indenture for, among other things, the purpose of
establishing the designation, form, terms and provisions of Securities of any
series as permitted by Sections 2.1 and 7.1 of the Original Indenture;
WHEREAS, the Issuer (i) desires the issuance of a series of Securities to
be designated as hereinafter provided and (ii) has requested the Trustee to
enter into this Third Supplemental Indenture for the purpose of establishing the
designation, form, terms and provisions of the Securities of such series;
WHEREAS, all action on the part of the Issuer necessary to authorize the
issuance of said Securities under the Original Indenture and this Third
Supplemental Indenture (the Original Indenture, as supplemented by this Third
Supplemental Indenture, being hereinafter called the "Indenture") has been duly
taken; and
WHEREAS, all acts and things necessary to make said Securities, when
executed by the Issuer and authenticated and delivered by the Trustee as
provided in the Original Indenture, the legal, valid and binding obligations of
the Issuer, and to constitute these presents a valid and binding supplemental
indenture according to its terms, have been done and performed, and the
execution of this Third Supplemental Indenture and the creation and issuance
under the Indenture of said Securities have in all respects been duly
authorized, and the Issuer, in the exercise of the legal right and power vested
in it, executes this Third Supplemental Indenture and proposes to create,
execute, issue and deliver said Securities;
NOW, THEREFORE, in order to establish the designation, form, terms and
provisions of, and to authorize the authentication and delivery of, said
Securities, and in consideration of the acceptance of said Securities by the
holders thereof and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
-----------
Capitalized terms not otherwise defined herein shall have the meanings set
forth in the Original Indenture.
ARTICLE II
THE TERMS OF THE NOTES
----------------------
Section 2.1 Terms of 7.95% Senior Notes, Series E due 2032.
----------------------------------------------
(a) There is hereby created one (1) series of Securities designated:
7.95% Senior Notes, Series E due 2032, in the aggregate principal amount
of $275,000,000 (the "Series E Senior Notes"). Upon delivery of a written order
to the Trustee in accordance with the provisions of Section 2.1 of the Original
Indenture, the Trustee shall authenticate and deliver the Series E Senior Notes.
Such written order shall specify the amount of the Series E Senior Notes to be
authenticated and the date on which such Series E Senior Notes are to be
authenticated.
(b) The Series E Senior Notes shall be substantially in the form of
Exhibit A hereto.
Section 2.2 Terms of Series E Senior Notes Issued Hereunder in Global Form.
--------------------------------------------------------------
(a) So long as DTC or its nominee is the registered owner or Holder of
a Global Security, DTC or its nominee, as the case may be, will be considered
the sole owner or Holder of the Series E Senior Notes represented by such Global
Security for all purposes under the Original Indenture and under the Series E
Senior Notes. No beneficial owner of an interest in a Global Security will be
able to transfer that interest except in accordance with DTC's applicable
procedures unless the Issuer shall issue certificates for the Series E Senior
Notes in definitive registered form.
(b) All payments of the principal of, and interest and additional
amounts and premium, if any, on, a Global Security will be made to DTC or its
nominees, as the registered owners thereof.
(c) Transfers between participants in DTC will be effected in the
ordinary way in accordance with DTC rules and will be settled in same-day funds.
(d) Certificated definitive Series E Senior Notes may be in
denominations of less than $100,000 to the extent any redemption has reduced
such Holder's aggregate holding of such Series E Senior Notes to less than
$100,000.
(e) If any redemption affecting the Series E Senior Notes would result
in the amount to be paid to a Holder of such affected Senior Note in respect of
such redemption not to equal $1,000 or an integral multiple thereof, the Issuer
shall instruct the Trustee to round the amount to be paid to such Holder to the
nearest $1,000 so that the amount to be paid to such Holder equals $1,000 or an
integral multiple thereof.
2
(f) Beneficial interests in a Global Security (and any Securities issued
in exchange therefor) will be subject to certain restrictions on transfer set
forth therein and in the Original Indenture and as set forth on the form of
such Global Security. Exhibit B, as referred to in Section 2.4 of the Original
Indenture and Exhibits C, D, E and F, as referred to in Section 2.6 of the
Original Indenture are attached hereto as Exhibits B, C, D, E and F,
respectively.
(g) Except in the limited circumstances described under Section 2.2(h)
below, beneficial interest in a Global Security will only be recorded by
book-entry and owners of beneficial interest in a Global Security will not be
entitled to receive physical delivery of certificates representing Securities.
(h) If (i) the Issuer notifies the Trustee in writing that DTC or any
successor depository is unwilling or unable to continue as a depository for a
Global Security or ceases to be a "clearing agency" registered under the
Exchange Act and a successor depository is not appointed by the Issuer within 90
days of such notice, (ii) the Issuer, at its option, notifies the Trustee in
writing that it elects to cause the issuance of the Securities issued hereunder
to be in certificated form or (iii) during an Event of Default, a holder of a
beneficial interest in a Global Security requests the issuance of certificated
Securities representing such holder's interest, then the Issuer shall issue
certificates for the Securities in definitive registered form substantially in
the form attached hereto in exchange for the Global Security outstanding.
(i) The holder of a certificated definitive registered Security may
transfer such Security in whole or in part by surrendering it at the Corporate
Trust Office of the Trustee in accordance with the terms of the Indenture and
such Security. Upon the transfer, exchange or replacement of definitive
Securities, the Issuer will deliver only definitive Securities that bear a
restrictive legend unless there is delivered to the Issuer such satisfactory
evidence, which may include an opinion of counsel, as may reasonably be required
by the Issuer, that neither the legend nor the restrictions on transfer set
forth therein are required to ensure compliance with the provisions of the
Securities Act.
Section 2.3 Interest, Principal, Maturity Date and Regular Record Date.
----------------------------------------------------------
The Series E Senior Notes shall bear interest on the unpaid principal
amount thereof from time to time outstanding from the date of authentication
thereof until such amount is paid in full at the rate of interest set forth in
the form of such Senior Note attached hereto. The principal amount of the Series
E Senior Notes shall be due and payable at maturity as set forth in the form of
Senior Note attached hereto.
Payment of principal of, premium, if any, and interest on the Series E
Senior Notes shall be made as provided in Sections 2.4, 2.10, 3.2 and 3.4 of the
Original Indenture except that the final payment of principal of the Series E
Senior Notes shall be made on the due date therefor to the account of the Holder
as such account shall appear in the Security Register, which amount shall be
payable upon presentation and surrender of such Senior Note at the office of the
Issuer.
The Series E Senior Notes shall mature on the date and in the amounts set
forth thereon.
The record date applicable to the Series E Senior Notes issued hereunder
shall be as set forth in the form of Senior Note attached hereto.
3
All payments of principal and interest with respect to certificated Series
E Senior Notes will be made by bank check mailed on the interest payment date to
the address of such Holder on the Security Register or, for Holders of at least
U.S. $1,000,000 in aggregate principal amount of Series E Senior Notes, by wire
transfer on the interest payment date to a dollar account maintained by the
payee with a bank in The City of New York; provided, that a written request from
such Holder to such effect designating such account is received by the Trustee
and the Issuer or the paying agent no later than the record date immediately
preceding such Interest Payment Date. Unless such designation is revoked, any
such designation made by such person with respect to such certificated Series E
Senior Notes will remain in effect with respect to any future payments with
respect to such certificated Senior Note payable to such person.
Section 2.4 Redemption, Optional Redemption.
-------------------------------
The Series E Senior Notes issued hereunder are subject to optional
redemption, in whole or in part, at any time at the option of the Issuer at a
redemption price equal to the outstanding principal amount of the Series E
Senior Notes being so redeemed plus accrued and unpaid interest thereon to the
date fixed for redemption together with the Applicable Premium applicable
thereto.
Section 2.5 Applicable Premium.
------------------
As used herein, "Applicable Premium" means an amount calculated as of the
date (the "Determination Date") fixed for the redemption of the Series E Senior
Notes as follows:
(i) the average life of the remaining scheduled payments of principal
in respect of Outstanding Series E Senior Notes (the "Remaining Average
Life") shall be calculated as of the Determination Date;
(ii) the yield to maturity calculated as of a date not more than five
days prior to the Determination Date for the United States Treasury
security having an average life equal to the Remaining Average Life of
such series and trading in the secondary market at the price closest to
the principal amount thereof (the "Primary Issue"); provided, however,
that if no United States Treasury security has an average life equal to
the Remaining Average Life of such series, the yields (the "Other
Yields") for the two maturities of United States treasury securities
having average lives most closely corresponding to such Remaining
Average Life and trading in the secondary market at the price closest to
the principal amount thereof shall be calculated, and the yield to
maturity for the Primary Issue shall be the yield interpolated or
extrapolated from such Other Yields on a straight line basis, rounding
in each of such relevant periods to the nearest month;
(iii) the discounted present value of the then remaining scheduled
payments of principal and interest (but excluding that portion of any
scheduled payment of interest that is actually due and paid on the
Determination Date) in respect of the Outstanding Series E Senior Notes
shall be calculated as of the Determination Date using a discount factor
equal to the sum of (x) the yield to maturity for the Primary Issue,
plus (y) 37.5 basis points; and
(iv) the amount of Applicable Premium in respect of the Series E Senior
Notes to be redeemed shall be an amount equal to (x) the discounted
present value of
4
such Series E Senior Notes to be redeemed determined in accordance with
clause (iii) above, minus (y) the unpaid principal amount of such Series
E Senior Notes; provided, however, that the Applicable Premium shall not
be less than zero; and
(v) such calculation shall be made by an Investment Banker.
Section 2.6 Amendment for Benefit of Series E Senior Notes.
----------------------------------------------
The Indenture is hereby amended, pursuant to Section 7.1(d) of the
Indenture for the benefit of the holders of the Series E Senior Notes and for so
long as the Series E Senior Notes are outstanding, as follows:
(a) Section 1.1 of the Indenture is amended by adding to the definitions
the following: "'Existing Generating Assets' means the coal plants and gas-fired
units owned by the Issuer as of the date of issuance of the $275,000,000 7.95%
Senior Notes, Series E due 2032."
(b) Section 3.9 of the Indenture is amended to delete the words "Initial
Generation Assets" and insert in lieu thereof the words "Initial Generating
Assets or Existing Generating Assets."
ARTICLE III
MISCELLANEOUS
-------------
Section 3.1 Execution of Supplemental Indenture.
-----------------------------------
This Third Supplemental Indenture is executed and shall be construed as
an indenture supplemental to the Original Indenture and, as provided in the
Original Indenture, this Third Supplemental Indenture forms a part thereof.
Section 3.2 Concerning the Trustee.
----------------------
The Trustee shall not be responsible in any manner for or with respect
to the validity or sufficiency of this Third Supplemental Indenture, or the due
execution hereof by the Issuer, or for or with respect to the recitals and
statements contained herein, all of which recitals and statements are made
solely by the Issuer.
Section 3.3 Counterparts.
------------
This Third Supplemental Indenture may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original;
but all such counterparts shall together constitute but one and the same
instrument.
Section 3.4 GOVERNING LAW.
-------------
THIS THIRD SUPPLEMENTAL INDENTURE AND THE SERIES E SENIOR NOTES ISSUED
HEREUNDER SHALL, PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW, BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE
CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SUCH SECTION 5-1401).
5
IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental
Indenture to be duly executed as of June 1, 2002.
AMEREN ENERGY GENERATING
COMPANY, as Issuer
By: /s/ Jerre E. Birdsong
-------------------------------------
Name: Jerre E. Birdsong
Title: Vice President and Treasurer
THE BANK OF NEW YORK, as Trustee
By: s/ Albert Lundy
--------------------------------------
Name: Albert Lundy
Title: As Agent for
EXHIBIT A
FORM OF SECURITY
[INCLUDE IF SECURITY IS A GLOBAL SECURITY DEPOSITED WITH THE U.S.
DEPOSITARY -- UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN
EXCHANGE FOR THIS CERTIFICATE OR ANY PORTION HEREOF IS REGISTERED IN THE NAME OF
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO.), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OTHER THAN THE DEPOSITORY
TRUST COMPANY OR A NOMINEE THEREOF IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.6 OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.]
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM AND IN ANY EVENT MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY
IN ACCORDANCE WITH THE INDENTURE, COPIES OF WHICH ARE AVAILABLE FOR INSPECTION
AT THE CORPORATE TRUST OFFICE OF THE TRUSTEE IN NEW YORK.
EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT