Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report 13 79K
2: EX-3.(II) Amended By-Laws 11 48K
3: EX-4.28 Loan Agreement Dtd 9/1/98 21 79K
4: EX-4.29 Loan Agreement Dtd 9/1/98 21 80K
5: EX-4.30 Loan Agreement Dtd 9/1/98 21 80K
6: EX-12 Computation of Ratios 2± 10K
7: EX-27 Financial Data Schedule 2± 10K
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 September 30, 1998
[ ] 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 1-2967.
UNION ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Missouri 43-0559760
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1901 Chouteau Avenue, St. Louis, Missouri 63103
(Address of principal executive offices and Zip Code)
Registrant's telephone number,
including area code: (314) 621-3222
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 October
31, 1998:
Common Stock, $5 par value, held by Ameren Corporation (parent
company of Registrant) - 102,123,834
Union Electric Company
Index
Page No.
Part I Financial Information (Unaudited)
Management's Discussion and Analysis 2
Balance Sheet
- September 30, 1998 and December 31, 1997 8
Statement of Income
- Three months, nine months and 12 months ended
September 30, 1998 and 1997 9
Statement of Cash Flows
- Nine months ended September 30, 1998 and 1997 10
Notes to Financial Statements 11
Part II Other Information 12
PART I. FINANCIAL INFORMATION (UNAUDITED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Union Electric Company (AmerenUE or the Registrant) is a subsidiary of Ameren
Corporation (Ameren), a holding company which is registered under the Public
Utility Holding Company Act of 1935 (PUHCA). In December 1997, AmerenUE and
CIPSCO Incorporated (CIPSCO) combined to form Ameren, with AmerenUE and CIPSCO's
subsidiaries, Central Illinois Public Service Company (AmerenCIPS) and CIPSCO
Investment Company (CIC), becoming wholly-owned subsidiaries of Ameren (the
Merger).
The following discussion and analysis should be read in conjunction with the
Notes to Financial Statements beginning on page 10, and the Management's
Discussion and Analysis of Financial Condition and Results of Operations (MD&A),
the Audited Financial Statements and the Notes to Financial Statements appearing
in the Registrant's 1997 Form 10-K.
RESULTS OF OPERATIONS
Earnings
Third quarter 1998 earnings of $204 million increased $23 million compared to
1997 third quarter earnings. Earnings for the nine months ended September 30,
1998 increased $18 million from the year-ago period to $296 million. Earnings
for the twelve months ended September 30, 1998, were $311 million, a $20 million
increase from the preceding 12-month period. Excluding the extraordinary charge
recorded in the fourth quarter of 1997 to write off the generation-related
regulatory assets and liabilities of the Registrant's Illinois retail electric
business, earnings for the 12-month period ended September 30, 1998, were $338
million.
Earnings fluctuated due to many conditions, the primary ones being: weather
variations, credits to electric customers, sales growth, fluctuating operating
costs, the write-off of certain generation-related regulatory assets and
liabilities, merger-related costs, and targeted separation plan expense. The
significant items affecting revenues, costs and earnings during the three-month,
nine-month and 12-month periods ended September 30, 1998, and 1997 are detailed
below.
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Electric Operations
Electric Operating Revenues Variations for periods ended September 30, 1998
from comparable prior-year periods
--------------------------------------------- ---------------- --------------- ------------------
(Millions of Dollars) Three Months Nine Months Twelve Months
--------------------------------------------- ---------------- --------------- ------------------
Credit to customers $ - $ (24) $ (22)
Effect of abnormal weather 42 64 66
Growth and other (6) 41 50
Interchange sales 35 23 9
--------------------------------------------- ------------------- ------------ ------------------
$ 71 $ 104 $ 103
--------------------------------------------- ------------------- ------------ ------------------
The $71 million increase in third quarter electric revenues compared to the
year-ago quarter was primarily due to warmer summer weather and increased
interchange sales. Weather-sensitive residential and commercial sales increased
15 percent and 7 percent, respectively, while industrial sales increased 3
percent, due to the strong regional economy.
Electric revenues for the first nine months of 1998 increased $104 million over
the same period in 1997 primarily due to warmer summer weather, growth in the
service territory and increased interchange revenues, partially offset by
increased credits to customers (see Note 5 under Notes to Financial Statements
for further information). Residential, commercial, and industrial sales
increased 10 percent, 5 percent, and 2 percent, respectively.
The $103 million increase in electric revenues for the 12 months ended September
30, 1998, compared to the prior 12-month period was primarily due to favorable
weather and growth in the service territory, partially offset by a higher
estimated Missouri customer credit recorded during the period (see Note 5 under
Notes to Financial Statements for further information). Residential, commercial
and industrial sales increased 9 percent, 4 percent, and 2 percent,
respectively.
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Fuel and Purchased Power Variations for periods ended September 30, 1998
from comparable prior-year periods
--------------------------------------------- ---------------- --------------- -----------------
(Millions of Dollars) Three Months Nine Months Twelve Months
--------------------------------------------- ---------------- --------------- -----------------
Fuel:
Variation in generation $ 15 $ 7 $ 6
Price (6) 1 (5)
Generation efficiencies and other - 3 2
Purchased power variation 14 29 29
--------------------------------------------- ---------------- --------------- ----------------
$ 23 $ 40 $ 32
--------------------------------------------- ---------------- --------------- ----------------
The increase in fuel and purchased power costs for the three, nine, and twelve
months ended September 30, 1998, versus the comparable prior year periods was
primarily due to increased sales volumes and higher purchased power prices.
While unprecedented prices for power purchases occurred in the marketplace
during the last week of June 1998, the Registrant was able to effectively manage
its power costs in the face of soaring wholesale electricity prices. Overall,
the abnormally high prices for power purchases in June had little impact on the
Registrant's financial results for the periods presented.
Gas Operations
Gas revenues were relatively flat compared to prior year due to lower sales
resulting from milder winter weather, which were offset in part by the annual
$11.5 million Missouri gas rate increase effective February 1998. Gas costs for
the nine and twelve months ended September 30, 1998, decreased $9 million and
$12 million, respectively, compared to the same year-ago periods primarily due
to lower gas prices and a decline in sales.
Other Operating Expenses
Other operating expense variations reflected recurring factors such as growth,
inflation, labor and benefit increases, in addition to a one-time charge for the
targeted separation plan, as discussed below.
In March 1998, Ameren announced plans to reduce its other operating expenses,
including plans to eliminate approximately 400 employee positions by mid-1999
through a hiring freeze and a targeted separation plan (the TSP). In July 1998,
Ameren offered separation packages to employees whose positions were to be
eliminated through the TSP. In the third quarter of 1998, the Registrant
recorded a one-time charge of $18 million (which reduced earnings $11 million)
representing its share of costs incurred to implement the TSP. The Registrant
expects that the hiring freeze and TSP will reduce its operating expenses by
approximately $7 - $11 million in 1998 and $14 - $18 million annually
thereafter.
Other operations expenses for the three months ended September 30, 1998,
increased $20 million compared to the three months ended September 30, 1997,
primarily due to the $18 million charge for the TSP.
Other operations expenses for the nine and twelve months ended September 30,
1998, increased $46 million and $53 million, respectively, compared to the same
year-ago periods primarily due to the $18 million charge for the targeted
separation plan and increases in injuries and damages expense, information
system-related costs and professional services expenses.
Maintenance expenses for the three and 12-month periods ended September 30,
1998, decreased $3 million and $4 million, respectively, compared to the
year-ago periods due to decreased scheduled fossil power plant maintenance.
Maintenance expenses for the nine months ended September 30, 1998 were
comparable to the same year-ago period as costs incurred to complete the
refueling of the Callaway Nuclear Plant in 1998 were offset by higher scheduled
fossil power plant maintenance in 1997.
Depreciation and amortization expense for the three, nine, and twelve-month
periods ended September 30, 1998, increased $3 million, $9 million, and $11
million, respectively, versus the comparable 1997 periods, primarily due to
increased depreciable property and amortization of the Missouri portion of
merger-related costs which were recorded as a regulatory asset upon Merger close
under the conditions of the Missouri Public Service Commission (MoPSC) order
approving the Merger.
Taxes
Income taxes charged to operating expenses for the three, nine, and twelve
months ended September 30, 1998 increased $14 million, $15 million, and $13
million, respectively, compared to the same year-ago periods due to higher
pretax income.
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Other Income and Deductions
Miscellaneous, net for the three months and nine months ended September 30,
1998, increased $6 million and $10 million, respectively, versus the comparable
1997 periods, primarily due to reduced merger-related costs. Miscellaneous, net
increased $27 million for the 12-month period ended September 30, 1998, compared
to the year-ago period primarily due to the reversal of the Missouri portion of
merger-related costs which were recorded as a regulatory asset upon Merger close
under conditions of the MoPSC order approving the Merger.
Balance Sheet
The $97 million increase in trade accounts receivable and unbilled revenues was
due primarily to higher revenues in August and September 1998 compared to
November and December 1997.
Changes in accounts and wages payable, other taxes accrued, and other current
assets result from the timing of various payments to taxing authorities and
suppliers.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $477 million for the nine months
ended September 30, 1998, compared to $538 million during the same 1997 period.
Cash flows used in investing activities totaled $155 million and $209 million
for the nine months ended September 30, 1998 and 1997, respectively.
Construction expenditures for the nine months ended September 30, 1998 for
constructing new or improving existing facilities, and complying with the Clean
Air Act were $156 million. In addition, the Registrant expended $8 million for
the acquisition of nuclear fuel. Capital requirements for the remainder of 1998
are expected to be principally for construction expenditures and the acquisition
of nuclear fuel.
Cash flows used in financing activities were $298 million for the nine months
ended September 30, 1998, compared to $307 million during the same 1997 period.
The Registrant's principal financing activities for the nine months ended
September 30, 1998, included the redemption of debt and the nuclear fuel lease
of $56 million and $54 million, respectively, and the payment of dividends.
On September 4, 1998, the Registrant issued $160 million in long-term debt due
2033. The initial interest rates on the debt were determined by an auction
procedure. The method for determining the interest rate may be changed from an
auction rate to a daily rate, weekly rate, commercial paper rate or a long-term
interest rate. The Registrant plans to use the proceeds to redeem existing
long-term debt in December 1998.
The Registrant plans to continue utilizing short-term debt to support normal
operations and other temporary requirements. The Registrant is authorized by the
Securities and Exchange Commission under PUHCA to have up to $1.1 billion of
short-term unsecured debt instruments outstanding at any one time. Short-term
borrowings consist of bank loans (maturities generally on an overnight basis)
and commercial paper (maturities generally within 10 to 45 days). At September
30, 1998, the Registrant had committed bank lines of credit aggregating $154
million (all of which were unused at such date) which make available interim
financing at various rates of interest based on LIBOR, the bank certificate of
deposit rate or other options. The lines of credit are renewable annually at
various dates throughout the year. At September 30, 1998, the Registrant had no
outstanding short-term borrowings.
The Registrant also has a bank credit agreement due 2000 which permits the
borrowing of up to $300 million on a long-term basis, all of which was unused
and available at September 30, 1998.
Additionally, the Registrant has a lease agreement that provides for the
financing of nuclear fuel. At September 30, 1998, the maximum amount that could
be financed under the agreement was $120 million. Cash provided from financing
for the first nine months of 1998 included redemptions under the lease for
nuclear fuel of $54 million, offset in part by $10 million of issuances. At
September 30, 1998, $74 million was financed under the lease.
RATE MATTERS
As a result of the Electric Service Customer Choice and Rate Relief Law of 1997
(the Law) providing for electric utility restructuring in Illinois, AmerenUE
filed a proposal with the Illinois Commerce Commission to eliminate the electric
fuel
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adjustment clause for Illinois retail customers, thereby including a
historical level of fuel costs in base rates. The ICC approved AmerenUE's filing
on April 28, 1998.
In June 1998, the Registrant filed a residential rate reduction tariff with the
ICC to comply with the requirements of the Law. Under provisions of the Law, a
rate decrease of 5 percent became effective for Illinois residential electric
customers beginning August 1, 1998.
See Note 5 under Notes to Financial Statements for further discussion of Rate
Matters.
ENVIRONMENTAL ISSUES
In July 1997, the United States Environmental Protection Agency (EPA) issued
final regulations revising the National Ambient Air Quality Standards for ozone
and particulate matter. At that time, specific emission control requirements
were still being developed. In September 1998, the EPA issued a final rule
pertaining to nitrogen oxide emissions, which will require significant
additional reductions in emissions from coal-fired boilers. Missouri (where all
of the Registrant's coal-fired power plant boilers are located) is included in
the area targeted for nitrogen oxide emissions reductions as part of the EPA's
regional control program. Reduction requirements in nitrogen oxide emissions
from the Registrant's coal-fired boilers will exceed 75 percent from 1990 levels
by the year 2003. Because of the magnitude of these additional reductions, the
Registrant will be required to incur significantly higher capital costs to meet
future compliance obligations for its coal-fired boilers or to purchase power
from other sources, either of which could have significantly higher operating
expenses associated with compliance. The significant nitrogen oxide emissions
reductions already achieved on several of the Registrant's coal-fired power
plants will help to reduce the costs of compliance with this regulation.
It is not yet possible to determine the exact magnitude of the nitrogen oxide
emission reductions required on the Registrant's power plants because each State
has up to one year to develop a plan to comply with the EPA rule. However,
preliminary analysis of the regulations indicate that selective catalytic
reduction technology will be required for some of the Registrant's units, as
well as other additional controls.
The full details of these requirements are under study by the Registrant.
Currently, the Registrant estimates that its additional capital expenditures to
comply with these regulations could range from $125-$175 million over the period
from 1999 to 2002. Associated operations and maintenance expenditures could
increase $5-$8 million annually, beginning in 2003. The Registrant will explore
alternatives to comply with these new regulations in order to minimize, to the
extent possible, its capital costs and operating expenses. At this time, the
Registrant is unable to predict the ultimate impact of these revised air quality
standards on its future financial condition, results of operations or liquidity.
YEAR 2000 ISSUE
The Year 2000 Issue relates to how dates are stored and used in computer
systems, applications, and embedded systems. As the century date change occurs,
certain date-sensitive systems need to be able to recognize the year as 2000 and
not as 1900. This inability to recognize or properly treat the year as 2000 may
cause these systems to process critical financial and operational information
incorrectly. The Registrant's primary concern is the potential for any
interruption in providing electric and gas service to customers, as well as the
potential to be unable to process critical financial and operational information
on a timely basis, including billing its customers, if appropriate steps are not
taken to address this issue.
Management has developed a Year 2000 plan (Plan) covering Ameren, including
AmerenUE, and Ameren's Board of Directors has been briefed about the Year 2000
Issue and how it may affect the Registrant.
Ameren's Plan to resolve the Year 2000 Issue involves three phases: assessment,
planning, and implementation/testing. Implementation of the Plan is directly
supervised by each area's responsible Vice President. A Year 2000 Project
Director coordinates the implementation of the Plan among functional teams who
are addressing issues specific to a particular area, such as nuclear and
non-nuclear generation facilities, energy management systems, etc. Ameren has
also engaged certain outside consultants, technicians and other external
resources to aid in formulating and implementing the Plan.
Ameren is approximately 95 percent complete with its assessment phase, which
included analyzing date-sensitive electronic hardware, software applications and
embedded systems and has developed a compliance plan to address issues that were
identified. Many of the major corporate computer systems at Ameren are
relatively new and therefore are either Year 2000 compliant or only require
minor modifications. Also, several of the operating hardware and embedded
systems (i.e. microprocessor chips) use analog technology instead of digital and
thus are unaffected by the two-digit date issue. In
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addition, Ameren has contacted hundreds of vendors and suppliers to verify
compliance. The assessment phase is expected to be completed by the end of the
first quarter 1999.
Ameren is also approximately 95 percent complete with its planning phase. Items
which have been identified for remediation have been prioritized into groups
based on their significance to company operations. The implementation/testing
phase for all components/applications is approximately 40 percent complete as of
September 30, 1998. Ameren expects to complete remediation of its significant
components/applications by the end of the third quarter 1999.
With respect to third parties, for areas that interface directly with
significant vendors, Ameren has inventoried vendors and major suppliers and is
currently assessing their Year 2000 readiness through surveys, websites and
personal contact. Ameren plans to follow up with major suppliers and verify Year
2000 compliance where appropriate. Ameren has queried its important suppliers
and health insurance providers. To date, Ameren is not aware of any problems
that would materially impact financial condition, results of operations or
liquidity. Neither Ameren or the Registrant has the means of ensuring that these
parties will be Year 2000 compliant. The inability of those parties to complete
their Year 2000 resolution process could materially impact Ameren and the
Registrant.
Ameren is also addressing the impact of electric power grid problems that may
occur outside of its own electric system. Ameren has started year 2000 electric
power grid impact planning through the system's various electric interconnection
affiliations, and is working with the Mid-American Interchange Network (MAIN) to
begin planning year 2000 operational preparedness and restoration scenarios. In
addition, Ameren provides monthly status reports to the North American Electric
Reliability Council (NERC) to assist them in assessing year 2000 readiness of
the regional electric grid. Through the Electric Power Research Institute
(EPRI), an industry-wide effort has been established to deal with year 2000
problems affecting digital systems and equipment used by the nation's electric
power companies. Under this effort, participating utilities are working together
to assess specific vendors' system problems and test plans. The assessment will
be shared by the industry as a whole to facilitate year 2000 problem solving.
In addressing the Year 2000 Issue, Ameren will incur internal labor costs as
well as external consulting and other expenses related to infrastructure
enhancements necessary to prepare for the new century. Ameren estimates that its
external costs (consulting fees and related costs) for addressing the Year 2000
Issue will range from $10 million to $15 million. As of September 30, 1998,
Ameren has expended approximately $2 million. Ameren's plans to complete Year
2000 modifications are based on management's best estimates, which are derived
utilizing numerous assumptions of future events including the continued
availability of certain resources, and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those plans. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, and similar uncertainties.
Ameren believes that, with appropriate modifications to existing computer
systems/components, updates by vendors and trading partners, and conversion to
new software and hardware in the ordinary course of business, the Year 2000
Issue will not pose significant operational problems for the Registrant.
However, if such conversions are not completed in a proper and timely manner by
all affected parties, the Year 2000 Issue could result in material adverse
operational and financial consequences to the Registrant, and there can be no
assurance that Ameren's efforts, or those of vendors and trading partners,
interconnection affiliates, NERC or EPRI, to address the Year 2000 Issue will be
successful. Ameren is in the process of developing contingency plans to address
potential risks, including risks of vendor/trading partners noncompliance, as
well as noncompliance of any of the Registrant's material operations. The first
operational contingency plan is expected to be completed by year-end. At this
time, the Registrant is unable to predict the ultimate impact of the Year 2000
Issue on the Registrant's financial condition, results of operations or
liquidity; however, the impact could be material.
ACCOUNTING MATTERS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities and
requires recognition of all derivatives on the balance sheet measured at fair
value. SFAS 133 is effective for fiscal years beginning after June 15, 1999.
Earlier application is encouraged, but permitted only as of the beginning of any
fiscal quarter that begins after issuance of the standard. At this time, the
Registrant is unable to determine the impact of SFAS 133 on its financial
position or results of operations upon adoption.
-6-
In February 1998, the Financial Accounting Standards Board issued SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits." SFAS
132 revises employers' disclosures about pension and other postretirement
benefit plans. SFAS 132 is effective for fiscal years beginning after December
15, 1998, although earlier application is encouraged. SFAS 132 is not expected
to have a material impact on the Registrant's financial position or results of
operations upon adoption.
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 provides guidance on accounting for the costs of
computer software developed or obtained for internal use. Under SOP 98-1,
certain costs, which are currently expensed by the Registrant, may be
capitalized and amortized over some future period. SOP 98-1 is effective for
fiscal years beginning after December 15, 1998, although earlier application is
encouraged. SOP 98-1 is not expected to have a material impact on the
Registrant's financial position or results of operations upon adoption.
SAFE HARBOR STATEMENT
Statements made in this Form 10-Q 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,
financial performance, and "Year 2000" issues. In connection with the "Safe
Harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Registrant is providing this cautionary statement to identify important factors
that could cause actual results to differ materially from those anticipated.
Factors include, but are not limited to, the effects of regulatory actions;
changes in laws and other governmental actions; competition; future market
prices for electricity; average rates for electricity in the Midwest; business
and economic conditions; weather conditions; fuel prices and availability;
generation plant performance; monetary and fiscal policies; and legal and
administrative proceedings.
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UNION ELECTRIC COMPANY
BALANCE SHEET
UNAUDITED
(Thousands of Dollars, Except Shares)
September 30, December 31,
ASSETS 1998 1997
------ ---- ----
Property and plant, at original cost:
Electric $8,952,272 $8,832,039
Gas 206,217 197,959
Other 36,023 36,023
9,194,512 9,066,021
Less accumulated depreciation and amortization 4,052,035 3,866,925
---------- ----------
5,142,477 5,199,096
Construction work in progress:
Nuclear fuel in process 95,330 134,804
Other 100,915 68,074
---------- ----------
Total property and plant, net 5,338,722 5,401,974
---------- ----------
Investments and other assets:
Nuclear decommissioning trust fund 141,084 122,438
Other 43,216 33,315
---------- ----------
Total investments and other assets 184,300 155,753
---------- ----------
Current assets:
Cash and cash equivalents 26,949 3,232
Accounts receivable - trade (less allowance for doubtful
accounts of $6,641 and $3,645, respectively) 273,465 179,708
Unbilled revenue 74,193 71,156
Other accounts and notes receivable 62,631 41,028
Materials and supplies, at average cost -
Fossil fuel 53,325 49,574
Other 96,168 97,375
Environmental bond redemption fund 160,000 --
Other 72,204 11,040
---------- ----------
Total current assets 818,935 453,113
---------- ----------
Regulatory assets:
Deferred income taxes 609,201 611,740
Other 167,467 179,705
---------- ----------
Total regulatory assets 776,668 791,445
---------- ----------
Total Assets $7,118,625 $6,802,285
========== ==========
CAPITAL AND LIABILITIES
-----------------------
Capitalization:
Common stock, $5 par value, authorized 150,000,000 shares -
Outstanding 102,123,834 shares $ 510,619 $ 510,619
Other paid-in capital, principally premium on
common stock 701,896 716,879
Retained earnings 1,265,067 1,159,956
---------- ----------
Total common stockholders' equity 2,477,582 2,387,454
Preferred stock not subject to mandatory redemption 155,197 155,197
Long-term debt 1,782,873 1,846,482
---------- ----------
Total capitalization 4,415,652 4,389,133
---------- ----------
Current liabilities:
Current maturity of long-term debt 174,102 28,797
Short-term debt -- 21,300
Accounts and wages payable 176,529 188,014
Accumulated deferred income taxes 44,288 35,809
Taxes accrued 245,240 94,167
Other 155,858 142,859
---------- ----------
Total current liabilities 796,017 510,946
---------- ----------
Accumulated deferred income taxes 1,259,980 1,264,800
Accumulated deferred investment tax credits 145,605 149,891
Regulatory liability 162,715 175,638
Other deferred credits and liabilities 338,656 311,877
---------- ----------
Total Capital and Liabilities $7,118,625 $6,802,285
========== ==========
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UNION ELECTRIC COMPANY
STATEMENT OF INCOME
UNAUDITED
(Thousands of Dollars)
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
-------------------------- -------------------------- ---------------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
OPERATING REVENUES:
Electric $ 836,898 $ 766,027 $ 1,848,177 $ 1,744,488 $ 2,292,260 $ 2,189,241
Gas 9,464 8,256 65,179 66,725 96,713 97,512
Other 75 71 342 353 492 498
----------- ----------- ----------- ----------- ----------- -----------
Total operating revenues 846,437 774,354 1,913,698 1,811,566 2,389,465 2,287,251
OPERATING EXPENSES:
Operations
Fuel and purchased power 174,610 151,752 422,234 382,272 539,957 508,066
Gas 6,476 7,006 34,911 43,968 54,396 66,061
Other 125,321 104,835 345,618 299,278 451,296 398,670
----------- ----------- ----------- ----------- ----------- ----------
306,407 263,593 802,763 725,518 1,045,649 972,797
Maintenance 44,685 47,957 159,560 158,877 218,109 222,521
Depreciation and amortization 65,338 62,487 194,113 185,151 256,923 246,348
Income taxes 131,454 117,395 201,717 187,023 207,460 194,846
Other taxes 64,815 64,276 166,860 166,680 212,129 213,483
----------- ----------- ----------- ----------- ----------- ----------
Total operating expenses 612,699 555,708 1,525,013 1,423,249 1,940,270 1,849,995
OPERATING INCOME 233,738 218,646 388,685 388,317 449,195 437,256
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used
during construction 1,152 1,184 3,370 3,014 4,817 4,546
Miscellaneous, net 3,152 (3,109) 4,042 (5,950) 17,326 (9,882)
----------- ----------- ----------- ----------- ----------- -----------
Total other income and deductions 4,304 (1,925) 7,412 (2,936) 22,143 (5,336)
INCOME BEFORE
INTEREST CHARGES 238,042 216,721 396,097 385,381 471,338 431,920
INTEREST CHARGES:
Interest 32,739 34,656 97,559 105,289 130,946 137,345
Allowance for borrowed funds
used during construction (1,248) (1,714) (4,566) (4,959) (6,283) (6,298)
----------- ----------- ----------- ----------- ----------- -----------
Net interest charges 31,491 32,942 92,993 100,330 124,663 131,047
INCOME BEFORE
EXTRAORDINARY CHARGE 206,551 183,779 303,104 285,051 346,675 300,873
----------- ----------- ----------- ----------- ----------- -----------
EXTRAORDINARY CHARGE
(NET OF INCOME TAXES) -- -- -- -- (26,967) --
----------- ----------- ----------- ----------- ----------- -----------
NET INCOME 206,551 183,779 303,104 285,051 319,708 300,873
----------- ----------- ----------- ----------- ----------- -----------
PREFERRED STOCK DIVIDENDS 2,204 2,204 6,613 6,613 8,817 9,925
----------- ----------- ----------- ----------- ----------- -----------
NET INCOME AFTER PREFERRED
STOCK DIVIDENDS $ 204,347 $ 181,575 $ 296,491 $ 278,438 $ 310,891 $ 290,948
=========== =========== =========== =========== =========== ===========
-9-
[Download Table]
UNION ELECTRIC COMPANY
STATEMENT OF CASH FLOWS
UNAUDITED
(Thousands of Dollars)
Nine Months Ended
September 30,
-------------------
1998 1997
---- ----
Cash Flows From Operating:
Net income $ 303,104 $ 285,051
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 186,984 178,315
Amortization of nuclear fuel 26,837 28,737
Allowance for funds used during construction (7,936) (7,973)
Deferred income taxes, net (6,804) (6,336)
Deferred investment tax credits, net (4,286) (4,627)
Changes in assets and liabilities:
Receivables, net (118,397) (36,180)
Materials and supplies (2,544) 8,081
Accounts and wages payable (11,485) (98,149)
Taxes accrued 151,073 175,664
Other, net (39,670) 15,793
--------- ---------
Net cash provided by operating activities 476,876 538,376
Cash Flows From Investing:
Construction expenditures (155,526) (204,028)
Allowance for funds used during construction 7,936 7,973
Nuclear fuel expenditures (7,523) (12,594)
--------- ---------
Net cash used in investing activities (155,113) (208,649)
Cash Flows From Financing:
Dividends on common stock (191,380) (194,546)
Dividends on preferred stock (6,613) (6,613)
Environmental bond redemption fund (160,000) --
Redemptions -
Nuclear fuel lease (53,670) (21,011)
Short-term debt (21,300) (4,300)
Long-term debt (35,000) (45,000)
Preferred stock -- (63,924)
Issuances -
Nuclear fuel lease 9,917 28,427
Long-term debt 160,000 --
--------- ---------
Net cash used in financing activities (298,046) (306,967)
Net increase in cash and cash equivalents 23,717 22,760
Cash and cash equivalents at beginning of year 3,232 4,897
--------- ---------
Cash and cash equivalents at end of period $ 26,949 $ 27,657
========= =========
Cash paid during the periods:
Interest (net of amount capitalized) $ 83,606 $ 79,047
Income taxes, net $ 122,738 $ 91,115
-10-
UNION ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
Note 1 - Effective December 31, 1997, following the receipt of all required
state and federal regulatory approvals, Union Electric Company (AmerenUE or the
Registrant) and CIPSCO Incorporated (CIPSCO) combined to form Ameren Corporation
(Ameren)(the Merger).
Note 2 - Financial statement note disclosures, normally included in financial
statements prepared in conformity with generally accepted accounting principles,
have been omitted in this Form 10-Q pursuant to the Rules and Regulations of the
Securities and Exchange Commission. However, in the opinion of the Registrant,
the disclosures contained in this Form 10-Q are adequate to make the information
presented not misleading. See Notes to Financial Statements included in the 1997
Form 10-K for information relevant to the financial statements contained in this
Form 10-Q, including information as to the significant accounting policies of
the Registrant.
Note 3 - In the opinion of the Registrant the interim financial statements filed
as part of this Form 10-Q reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
periods presented. Registrant's financial statements were prepared to permit the
information required in the Financial Data Schedule (FDS), Exhibit 27, to be
directly extracted from the filed statements. The FDS amounts correspond to or
are calculable from the amounts reported in the financial statements or notes
thereto.
Note 4 - Due to the effect of weather on sales and other factors which are
characteristic of public utility operations, financial results for the periods
ended September 30, 1998 and 1997, are not necessarily indicative of trends for
any three-month, nine-month, or twelve-month period.
Note 5 - On July 21, 1995, the Missouri Public Service Commission (MoPSC)
approved an agreement involving the Registrant's Missouri electric rates. The
Agreement included a three-year experimental alternative regulation plan that
provides that earnings in excess of a 12.61 percent regulatory return on equity
(ROE) be shared equally between customers and shareholders and earnings above
14 percent ROE be credited to customers. The formula for computing the credit
uses twelve-month results ending June 30, rather than calendar year earnings.
During the nine months ended September 30, 1998, the Registrant recorded an
estimated $43 million credit for the final year of this plan compared to a
$20 million credit recorded for 1997. This credit, which the Registrant expects
to pay to Missouri customers later this year, was reflected as a reduction in
electric revenues.
A new three-year experimental alternative regulation plan was included in the
joint agreement approved by the MoPSC in its February 1997 order approving the
Merger. Like the original plan, the new plan requires that earnings over a 12.61
percent ROE up to a 14 percent ROE will be shared equally between customers and
stockholders. The new three-year plan will also return to customers 90 percent
of all earnings above a 14 percent ROE up to a 16 percent ROE. Earnings above 16
percent ROE will be credited entirely to customers. The joint agreement also
provides for a Missouri electric rate decrease, effective September 1, 1998,
based on the weather-adjusted average annual credits to customers under the
original experimental alternative regulation plan. The final rate reduction has
not been determined at this time pending the outcome of regulatory proceedings.
Note 6 - In July 1998, Ameren offered separation plan packages to employees
whose positions were eliminated through a targeted separation plan. During the
third quarter of 1998, a one-time, pretax charge of $18 million was recorded,
which reduced earnings $11 million, representing the Registrant's share of costs
incurred to implement the targeted separation plan.
Note 7 - Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income" became effective on January 1, 1998. SFAS 130 requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in the financial statements with
the same prominence as other financial statement components. Adoption of SFAS
130 did not have a material effect on the financial position, results of
operations, liquidity or presentation of financial information of the
Registrant.
-11-
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 3(ii)-By-Laws of Union Electric Company, as amended as of
June 11, 1998.
Exhibit 4.28 - Series 1998A Loan Agreement dated as of September
1, 1998 between The State Environmental Improvement and Energy
Resources Authority of the State of Missouri and the Registrant.
Exhibit 4.29 - Series 1998B Loan Agreement dated as of September
1, 1998 between The State Environmental Improvement and Energy
Resources Authority of the State of Missouri and the Registrant.
Exhibit 4.30 - Series 1998C Loan Agreement dated as of September
1, 1998 between The State Environmental Improvement and Energy
Resources Authority of the State of Missouri and the Registrant.
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements, 12 Months Ended
September 30, 1998.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K. The Registrant filed a report on Form 8-K
dated September 24, 1998 reporting on the impact of Ameren Corporation's (parent
company of the Registrant) employee separation plan and on the effect of the
final rule issued in September 1998 by the United States Environmental
Protection Agency pertaining to nitrogen oxide emissions.
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.
UNION ELECTRIC COMPANY
(Registrant)
By /s/ Donald E. Brandt
-----------------------------
Donald E. Brandt
Senior Vice President
Finance and Corporate Services
Date: November 13, 1998
- 12 -
Dates Referenced Herein and Documents Incorporated by Reference
4 Subsequent Filings that Reference this Filing
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