UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
OR
( ) 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 1-3672
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
Illinois 37-0211380
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
607 East Adams Street, Springfield, Illinois 62739
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (217) 523-3600
Securities Registered Pursuant to Section 12(b) of the Act: None.
Securities Registered Pursuant to Section 12(g) of the Act:
Title Of Class
Cumulative Preferred Stock, par value $100 per share
Depositary Shares, each representing one-fourth of a share of 6.625%
Cumulative Preferred Stock, par value $100 per share
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 ( ).
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X).
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ( ). No (X).
As of June 28, 2002, Ameren Corporation held all 25,452,373 outstanding
shares of common stock, without par value, of Central Illinois Public Service
Company. The aggregate market value of the voting preferred stock held by
non-affiliates of Central Illinois Public Service Company at June 28, 2002,
determined by trader derived valuations based on current market conditions on a
spread basis (excluding preferred stock for which prices are not publicly
available) was $28,200,000.
Shares of Common Stock without par value, outstanding as of March 21, 2003:
25,452,373 shares (all owned by Ameren Corporation).
Documents incorporated by references.
Portions of the registrant's definitive proxy statement for the 2003 annual
meeting are incorporated by reference into Part III.
TABLE OF CONTENTS
Page
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PART I
Item 1 Business
General......................................................................................................... 1
Capital Program and Financing................................................................................... 3
Rates and Regulation............................................................................................ 3
Industry Issues................................................................................................. 4
Available Information........................................................................................... 4
Item 2 Properties........................................................................................................... 5
Item 3 Legal Proceedings.................................................................................................... 5
Item 4 Submission of Matters to a Vote of Security Holders.................................................................. 6
Executive Officers of the Registrant (Item 401(b) of Regulation S-K)............................................................ 7
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder Matters................................................ 9
Item 6 Selected Financial Data.............................................................................................. 9
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations................................ 10
Item 7A Quantitative and Qualitative Disclosures about Market Risk........................................................... 23
Item 8 Financial Statements and Supplementary Data.......................................................................... 24
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................................. 48
PART III
Item 10 Directors and Executive Officers of the Registrant................................................................... 48
Item 11 Executive Compensation............................................................................................... 48
Item 12 Security Ownership of Certain Beneficial Owners and Management....................................................... 48
Item 13 Certain Relationships and Related Transactions....................................................................... 48
Item 14 Controls and Procedures.............................................................................................. 48
PART IV
Item 15 Exhibits, Financial Statement Schedules and Reports on Form 8-K...................................................... 49
SIGNATURES...................................................................................................................... 54
CERTIFICATIONS.................................................................................................................. 54
EXHIBIT INDEX................................................................................................................... 57
This Form 10-K contains "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements should be read with the cautionary statements
and important factors included in this Form 10-K at pages 6 and 22 under
the heading "Forward-Looking Statements." Forward-looking statements are
all statements other than statements of historical fact, including those
statements that are identified by the use of the words "anticipates,"
"estimates," "expects," "intends," "plans," "predicts," "projects" and
similar expressions.
PART I
ITEM 1. BUSINESS.
GENERAL
Central Illinois Public Service Company, headquartered in Springfield,
Illinois, operates as AmerenCIPS and is a wholly-owned subsidiary of Ameren
Corporation (Ameren). We operate a rate-regulated electric and natural gas
transmission and distribution business. We were incorporated in Illinois in
1902. We supply electric and gas utility service to portions of central and
southern Illinois having an estimated population of 820,000 within an area of
approximately 20,000 square miles. We furnish electric service in 557
incorporated and unincorporated communities and adjacent suburban and rural
areas. We also furnish natural gas service to retail customers in 267
incorporated and unincorporated communities and adjacent suburban and rural
areas located in 41 counties of central and southern Illinois. We supply
electric service to about 325,000 customers and natural gas service to about
170,000 customers.
Our service territory is predominantly made up of small towns and rural
areas. Our territory is located in 66 counties in Illinois, that are devoted
principally to agriculture and diversified industrial operations. Key industries
include petroleum and petrochemical industries, food processing, metal
fabrication and coal mining.
When we refer to AmerenCIPS, our, we or us, we are referring to Central
Illinois Public Service Company.
Ameren is a public utility holding company registered with the Securities
and Exchange Commission (SEC) under the Public Utility Holding Company Act of
1935 (PUHCA), as amended, and is headquartered in St. Louis, Missouri. Ameren
was incorporated in Missouri on August 7, 1995. On December 31, 1997, following
the receipt of all required approvals, CIPSCO Incorporated (CIPSCO) and Union
Electric Company combined with the result that the common shareholders of CIPSCO
and Union Electric Company became the common shareholders of Ameren, and Ameren
became the owner of 100% of the common stock of Union Electric Company and
CIPSCO's operating subsidiaries: Central Illinois Public Service Company and
CIPSCO Investment Company. Ameren completed its acquisition of CILCORP Inc.
(CILCORP) on January 31, 2003 and of Medina Valley Cogen (No. 4), LLC on
February 4, 2003 from The AES Corporation (AES). See CILCORP Acquisition below
for further information. In addition to us, Ameren's primary subsidiaries and
our affiliates are as follows:
o Union Electric Company, which operates a rate-regulated electric
generation, transmission and distribution business and a rate-regulated
natural gas distribution business in Missouri and Illinois as AmerenUE.
AmerenUE was incorporated in Missouri in 1922 and is successor to a number
of companies, the oldest of which was organized in 1881. It is the largest
electric utility in the State of Missouri and supplies electric and gas
service in parts of central and eastern Missouri and west central Illinois
having an estimated population of 2.6 million within an area of
approximately 24,500 square miles, including the greater St. Louis area.
AmerenUE supplies electric service to about 1.2 million customers and
natural gas service to about 130,000 customers.
o Central Illinois Light Company, a subsidiary of CILCORP, which operates, a
rate-regulated transmission and distribution business, an electric
generation business, and a rate-regulated natural gas distribution business
in Illinois. AmerenCILCO was incorporated in Illinois in 1913. It supplies
electric and gas utility service to portions of central and east central
Illinois in an area of approximately 3,700 and 4,500 square miles,
respectively. AmerenCILCO supplies electric service to about 200,000
customers and natural gas service to about 205,000 customers. See CILCORP
Acquisition below for further information.
o AmerenEnergy Resources Company (Resources Company), which consists of non
rate-regulated operations. Subsidiaries include AmerenEnergy Generating
Company (Generating Company) that operates non rate-regulated electric
generation in Missouri and Illinois, AmerenEnergy Marketing Company
(Marketing Company), which markets power for periods over one year,
AmerenEnergy Fuels and Services Company, which procures fuel and manages
the related risks for Ameren's affiliated companies and AmerenEnergy Medina
Valley Cogen (No. 4), LLC, which indirectly owns a 40 megawatt, gas-fired
electric co-generation plant. On February 4, 2003, Ameren completed its
acquisition of AES Medina Valley Cogen (No. 4), LLC from AES and renamed it
AmerenEnergy Medina Valley Cogen (No. 4), LLC. See CILCORP Acquisition
below for further information. Generating Company was incorporated in
Illinois in March 2000 in conjunction with the Illinois Electric Service
Customer Choice and Rate Relief Law of 1997 (the Illinois Law). This
Illinois Law provides for electric utility restructuring and introduces
competition into the retail supply of electric energy in Illinois.
Generating Company commenced operations on May 1, 2000 when we transferred
to Generating
1
Company all of the following: our generating assets, consisting of the
generating facilities described below under Item 2. Properties; all related
fuel, supply, transportation, maintenance and labor agreements;
approximately 45% of our employees; and some other related rights, assets
and liabilities. See below for further information regarding this transfer.
o Ameren Services Company (Ameren Services), incorporated in Missouri, which
provides administrative, accounting, legal, engineering, executive, and
other support services to Ameren and all of its subsidiaries;
o AmerenEnergy, Inc., which serves as a power marketing and risk management
agent for AmerenUE and Generating Company for transactions of primarily
less than one year;
o Electric Energy, Inc. (EEI), which operates electric generation and
transmission facilities in Illinois that supply electric power primarily to
a uranium enrichment plant located in Paducah, Kentucky. Ameren has a 60%
ownership interest in EEI and consolidates it for financial reporting
purposes. On April 30, 2002, we transferred our 20% common stock interest
in EEI to Ameren in the form of a non-cash dividend of common stock in EEI.
The book value of our investment in EEI was $1.8 million. Subsequently,
Ameren contributed such stock to Resources Company. This transfer completed
the process of achieving a full divestiture of all electric generating
capacity that had been owned directly or indirectly by us. Our affiliate,
AmerenUE currently owns 40% of the common stock of EEI. The remaining 40%
of the common stock of EEI is held 20% each by Kentucky Utilities Company
and Illinova Generating Company.
For additional information regarding the acquisition of CILCORP and AES
Medina Valley Cogen (No. 4) LLC, see Recent Developments in Management's
Discussion and Analysis of Financial Condition and Results of Operations under
Item 7 and Notes 1 and 15 to our Financial Statements under Item 8.
In accordance with the Illinois Law, on May 1, 2000, following the receipt
of all required state and federal regulatory approvals, we transferred all of
our electric generating assets totaling 2,860 megawatts of capacity and related
liabilities, at historical net book value, to a newly created nonregulated
affiliate, Generating Company (the Transfer). The Transfer was made in exchange
for a subordinated promissory note from Generating Company in the principal
amount of $552 million and shares of Generating Company's common stock. The
assets transferred by us included the five generating stations located in
Newton, Coffeen, Meredosia, Grand Tower and Hutsonville, Illinois, along with
related fuel, supply, transportation, maintenance and labor agreements and other
rights, assets and liabilities related to the generation of electricity by us.
Seven hundred and fifty employees, or approximately 45% of our workforce, were
also transferred to Generating Company as part of the Transfer. As a result of
the Transfer, our business has been exclusively electric and gas utility
transmission and distribution operations since May 1, 2000. For additional
information on the Transfer including the power supply arrangement we entered
into to meet our public utility obligations, see Overview in Management's
Discussion and Analysis of Financial Condition and Results of Operations under
Item 7 and Notes 1, 2 and 3 to our Financial Statements under Item 8.
For the year 2002, 80% (2001 - 80%, 2000 - 80%) of our total operating
revenues was derived from the sale of electric energy and 20% (2001 - 20%, 2000
- - 20%) from the sale of natural gas.
We employed 878 persons at December 31, 2002. For information on a
voluntary retirement program offered in December 2002 and labor agreements and
other labor matters, see Outlook - Labor Agreements in Management's Discussion
and Analysis of Financial Condition and Results of Operations under Item 7 and
Notes 8 and 12 to our Financial Statements under Item 8.
CILCORP Acquisition
On January 31, 2003, after receipt of the necessary regulatory agency
approvals and clearance from the Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act, Ameren completed its acquisition
of all of the outstanding common stock of CILCORP from AES. CILCORP is the
parent company of Peoria, Illinois-based Central Illinois Light Company, which
operated as CILCO. With the acquisition, CILCO became an Ameren subsidiary, but
remains a separate utility company, operating as AmerenCILCO. On February 4,
2003, Ameren also completed its acquisition of AES Medina Valley Cogen (No. 4),
LLC (Medina Valley), which indirectly owns a 40 megawatt, gas-fired electric
co-generation plant. With the acquisition, Medina Valley became a wholly-owned
subsidiary of Resources Company and was renamed AmerenEnergy Medina Valley Cogen
(No. 4), LLC. The CILCORP and AmerenEnergy Medina Valley Cogen (No. 4), LLC
financial statements will be included in Ameren's consolidated financial
statements effective with the January and February 2003 acquisition dates.
Ameren acquired CILCORP to complement its existing Illinois electric and
gas operations. The purchase included CILCO's rate-regulated electric and
natural gas businesses in Illinois serving approximately 200,000 and 205,000
2
customers, respectively, of which approximately 150,000 are combination electric
and gas customers. CILCO's service territory is contiguous to our service
territory. CILCO also has a non rate-regulated electric and gas marketing
business principally focused in the Chicago, Illinois region. Finally, the
purchase includes approximately 1,200 megawatts of largely coal-fired generating
capacity, most of which is expected to become non rate-regulated in 2003.
The total purchase price was approximately $1.4 billion and included the
assumption of CILCORP and Medina Valley debt and preferred stock at closing of
approximately $900 million, with the balance of the purchase price of
approximately $500 million paid with cash on hand. The purchase price is subject
to certain adjustments for working capital and other changes pending the
finalization of CILCORP's closing balance sheet. The cash component of the
purchase price came from Ameren's issuances in September 2002 of 8.05 million
common shares and in early 2003 of 6.325 million common shares.
For additional information regarding our business operations, see
Management's Discussion and Analysis of Financial Condition and Results of
Operations under Item 7 and Note 1 to our Financial Statements under Item 8.
CAPITAL PROGRAM AND FINANCING
For information on our capital program and financial needs see Liquidity
and Capital Resources in Management's Discussion and Analysis of Financial
Condition and Results of Operations under Item 7 and Notes 3, 6, 7 and 12 to our
Financial Statements under Item 8.
RATES AND REGULATION
Rates
Rates that we are allowed to charge for our services are the single most
important item influencing our financial position, results of operations and
liquidity. We are highly regulated. The rates we charge our customers are
determined by governmental organizations. Decisions by these organizations are
influenced by many factors, including our recent cost of providing service, our
quality of service, regulatory staff knowledge and experience, economic
conditions and social and political views. Decisions made by these organizations
regarding our rates could have a material impact on our financial position,
results of operations and liquidity.
For the year 2002, approximately 91% of our electric operating revenues
were based on rates regulated by the Illinois Commerce Commission (ICC) and 9%
on rates regulated by the Federal Energy Regulatory Commission (FERC). Our gas
operating revenues for the year 2002 were based on rates regulated exclusively
by the ICC. For information on rate matters in these jurisdictions, see Note 2
to our Financial Statements under Item 8.
General Regulatory Matters
As a subsidiary of Ameren, a holding company registered with the SEC under
the PUHCA, we are subject to the regulatory provisions of the PUHCA, including
provisions relating to the issuance of securities, sales and acquisitions of
securities and utility assets, affiliate transactions, financial reporting
requirements, and the services performed by Ameren Services and AmerenEnergy
Fuels and Services Company. Issuance of short-term and long-term debt and other
securities by Ameren and issuance of debt having a maturity of twelve months or
less by AmerenCIPS, AmerenUE and AmerenCILCO are subject to approval by the SEC
under the PUHCA.
We are subject to regulation by the ICC as to rates, service, issuance of
equity securities, issuance of debt having a maturity of more than twelve
months, mergers, and various other matters. We are also subject to regulation by
the FERC as to rates and charges in connection with the wholesale sale of energy
and transmission in interstate commerce, mergers, affiliate transactions, and
certain other matters.
For information on regulatory matters in these jurisdictions, including the
current status of electric transmission matters pending before the FERC, see
Liquidity and Capital Resources in Management's Discussion and Analysis of
Financial Condition and Results of Operations under Item 7 and Note 2 to our
Financial Statements under Item 8.
3
Environmental Matters
Certain of our operations, are subject to federal, state and local
environmental regulations relating to the safety and health of personnel, the
public and the environment, including the identification, generation, storage,
handling, transportation, disposal, record keeping, labeling, reporting of and
emergency response in connection with hazardous and toxic materials, safety and
health standards, and environmental protection requirements, including standards
and limitations relating to the discharge of air and water pollutants. Failure
to comply with those statutes or regulations could have material adverse effects
on us, including the imposition of criminal or civil liability by regulatory
agencies or civil fines and liability to private parties, and the required
expenditure of funds to bring us into compliance. We believe we are in material
compliance with existing regulations. In connection with the Transfer, we have
agreed to indemnify Generating Company for environmental claims relating to the
transferred generating facilities for events or occurrences arising prior to May
1, 2000.
For additional discussion of environmental matters, see Liquidity and
Capital Resources in Management's Discussion and Analysis of Financial Condition
and Results of Operations under Item 7 and Note 12 to our Financial Statements
under Item 8.
Electric and Gas Supply
We acquire all of our electric supply from Marketing Company under a fixed
price contract that currently expires at the end of 2004, which we plan to seek
to extend to the end of 2006. See Note 2 to our Financial Statements under Item
8 for further information about an electric power supply agreement that we have
with Marketing Company.
We acquire our gas supply from various sources and are allowed to collect
through rates any change in gas costs. See Notes 2 and 12 to our Financial
Statements, under Item 8 for further information under Item 8.
INDUSTRY ISSUES
We are facing issues common to the electric and gas utility industries,
which have emerged during the past several years. These issues include:
o the potential for more intense competition;
o the potential for changes in the structure of regulation;
o changes in the structure of the industry as a result of changes in
federal and state laws, including the formation of regional
transmission organizations;
o numerous troubled companies within the energy sector and their impact
on energy marketing and access to the capital markets;
o on-going consideration of additional changes of the industry by
federal and state authorities;
o continually developing environmental laws, regulations and issues;
o proposals for demand-side management programs; and
o global climate issues.
We are monitoring these issues and are unable to predict at this time what
impact, if any, these issues will have on our operations, financial condition or
liquidity. For additional information, see Outlook in Management's Discussion
and Analysis of Financial Condition and Results of Operations under Item 7 and
Notes 2 and 12 to our Financial Statements under Item 8.
AVAILABLE INFORMATION
We make available free of charge through Ameren's Internet website
(http://www.ameren.com) our annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and any amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 as soon as reasonably practicable after we electronically file such
reports with, or furnish it to, the SEC. This information, for our affiliates,
Ameren, AmerenUE, CILCORP, AmerenCILCO and Generating Company, is also available
through Ameren's Internet website.
4
We also make available free of charge through Ameren's Internet website the
code of business conduct for directors, officers and employees of Ameren and its
subsidiaries, including us, referred to as Ameren's Corporate Compliance Policy.
This document is also available in print upon written request to Secretary, P.O.
Box 66149, St. Louis, Missouri 63166-6149.
ITEM 2. PROPERTIES.
For information on our construction program, electric transmission assets
and the Transfer, see General under Item 1, Results of Operations and Liquidity
and Capital Resources in Management's Discussion and Analysis of Financial
Condition and Results of Operations under Item 7 and Note 2 to our Financial
Statements under Item 8.
Ameren is a member of MAIN (Mid-America Interconnected Network), which is
one of the ten regional electric reliability councils organized for coordinating
the planning and operation of the nation's bulk power supply. MAIN operates
primarily in Wisconsin, Michigan, Illinois and Missouri.
Ameren's bulk power system is operated as an Ameren-wide control area and
transmission system under the FERC approved amended joint dispatch agreement
between AmerenUE, Generating Company and us. The amended joint dispatch
agreement provides a basis upon which AmerenUE and Generating Company can
participate in the coordinated operation of AmerenUE's and our transmission
facilities with AmerenUE's and Generating Company's generating facilities in
order to achieve economies consistent with the provision of reliable electric
service and an equitable sharing of the benefits and costs of that coordinated
operation. In 2002, Ameren had more than 30 interconnections for transmission
service and the exchange of electric energy, directly and through the facilities
of others. Our Illinois-based affiliate, AmerenCILCO, is currently expected to
continue to operate as a separate control area. As such, its generating plants
will not be jointly dispatched with the generating plants owned by Generating
Company and AmerenUE. AmerenCILCO is a transmission owning member of the Midwest
Independent System Operating (Midwest ISO) and has transferred functional
control of its system to the Midwest ISO. Transmission service on the
AmerenCILCO transmission system is provided pursuant to the terms of the Midwest
ISO open access transmission tariff on file with the FERC. For information on
AmerenUE's and our participation in the Midwest ISO, see Note 2 to our Financial
Statements under Item 8.
As of December 31, 2002, we owned approximately 1,900 circuit miles of
electric transmission lines. We also operate one propane-air plant, four
underground gas storage fields and 4,900 miles of natural gas transmission and
distribution mains. Our other properties include distribution lines, underground
cable, warehouses, garages and repair shops.
In 2002, we transferred our principal office building and related leasehold
interests located in Springfield, Illinois to our affiliate, CIPSCO Investment
Company, at net book value of approximately $4.7 million. Since the transfer, we
continue to use a portion of the office building for our principal executive
office, pursuant to a lease with CIPSCO Investment Company.
Substantially all of our property is subject to the direct first lien of
the indenture securing our first mortgage bonds. On May 1, 2000, we transferred
all of our generating facilities and related assets to Generating Company. As a
part of this Transfer, our generating property and plant were released from the
lien of the indenture securing our first mortgage bonds. For additional
information on this Transfer, see General section under Item 1 and Note 2 to our
Financial Statements under Item 8.
ITEM 3. LEGAL PROCEEDINGS.
We are involved in legal and administrative proceedings before various
courts and agencies with respect to matters arising in the ordinary course of
business, some of which involve substantial amounts. We believe that the final
disposition of these proceedings, except as otherwise noted in this report, will
not have a material adverse effect on our financial position, results of
operations or liquidity.
For additional information on legal and administrative proceedings, see
Rates and Regulation under Item 1, Liquidity and Capital Resources and
Regulatory Matters in Management's Discussion and Analysis of Financial
Condition and Results of Operations under Item 7, and Notes 2 and 12 to our
Financial Statements under Item 8.
5
FORWARD-LOOKING STATEMENTS
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 some 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 subsequent
securities filings, could cause results to differ materially from management
expectations as suggested by such "forward-looking" statements:
o the effects of 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 due to, among other
things, deregulation of certain aspects of our business at both the state
and federal levels;
o the effects of participation in a FERC-approved Regional Transmission
Organization, including activities associated with the Midwest ISO;
o availability and future market prices for purchased power, electricity and
natural gas, including the use of financial and derivative instruments and
volatility of changes in market prices;
o the cost of commodities, such as natural gas, and our ability to recover
such increased cost;
o average rates for electricity in the Midwest;
o business and economic conditions;
o the impact of the adoption of new accounting standards on the application
of appropriate technical accounting rules and guidance;
o interest rates and the availability of capital;
o actions of rating agencies and the effects of such actions;
o weather conditions;
o the impact of strategic initiatives, including acquisitions and
divestitures;
o the impact of current environmental regulations on utilities 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 benefit costs, including changes in returns of
benefit plan assets;
o disruptions of the capital markets or other events making Ameren's and our
access to necessary capital more difficult or costly;
o cost and availability of transmission capacity required to satisfy our
energy sales; and
o legal and administrative proceedings.
Given these uncertainties, undue reliance should not be placed on these
forward-looking statements. Except to the extent required by federal securities
laws, we undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 2002.
6
INFORMATION REGARDING EXECUTIVE OFFICERS REQUIRED BY ITEM 401(b) OF
REGULATION S-K:
Age At Present Position Date First Elected
Name 12/31/02 and Business Experience or Appointed
---- -------- ----------------------- ------------------
Gary L. Rainwater 56 President, Chief Executive 1/1/98
Officer and Director 12/2/97
Mr. Rainwater was elected Executive Vice President of AmerenCIPS in January 1997
and was named to his present position in December 1997. Before joining
AmerenCIPS, he worked for AmerenUE for 17 years, beginning his career in 1979 as
an engineer. He was named General Manager - Corporate Planning in 1988 and Vice
President in 1993. Mr. Rainwater is also an officer at various of our other
affiliates, including President and Chief Operating Officer of Ameren.
Paul A. Agathen 55 Senior Vice President 10/12/01
and Director 12/31/97
Mr. Agathen was employed by AmerenUE in 1975 as an attorney. He was named
General Attorney of AmerenUE in 1982, Vice President, Environmental and Safety
in 1994 and Senior Vice President in 1996. He was elected to his present
position at AmerenCIPS in 2001. Mr. Agathen is also an officer at various of our
other affiliates.
Warner L. Baxter 41 Senior Vice President 8/30/01
and Director 4/22/99
From 1983 to 1995, Mr. Baxter was employed by Price Waterhouse (now
PricewaterhouseCoopers LLP). Mr. Baxter joined AmerenUE in 1995 as Assistant
Controller. He was promoted to Controller of AmerenUE in 1996 and was elected
Vice President and Controller of AmerenUE and Ameren in 1998. He was elected
Vice President and Controller of AmerenCIPS in 1999. Mr. Baxter was elected to
his present position at AmerenCIPS in 2001. Mr. Baxter is also an officer at
various of our other affiliates, including Senior Vice President, Finance of
Ameren.
Daniel F. Cole 49 Senior Vice President 10/12/01
Mr. Cole is a Senior Vice President of AmerenCIPS. AmerenUE employed Mr. Cole in
1976 as an engineer. He was named AmerenUE's Manager--Resource Planning in 1996
and General Manager--Corporate Planning in 1997. In 1998, Mr. Cole was elected
as Vice President of Corporate Planning of Ameren Services. Mr. Cole was elected
to his present position at AmerenCIPS in 2001. Mr. Cole is also an officer at
various of our other affiliates.
Garry L. Randolph 54 Senior Vice President 10/12/01
Mr. Randolph was elected as an officer of AmerenCIPS in 2001. He was employed by
AmerenUE in 1977 as an engineer and elected Vice President, Nuclear Operations
in 1992, Vice President and Chief Nuclear Officer in 1997, Senior Vice President
and Chief Nuclear Officer in 2000, and Senior Vice President--Generation and
Chief Nuclear Officer in 2001. Mr. Randolph is also an officer at various of our
other affiliates.
Thomas R. Voss 55 Senior Vice President 6/1/99
and Director 10/12/01
Mr. Voss began his career with AmerenUE in 1969 as an engineer. After four years
of military service, he returned to AmerenUE and from 1975 to 1988, held various
positions including district manager and distribution operating manager. Mr.
Voss was elected Vice President of AmerenCIPS in 1998. Mr. Voss was elected to
his present position at AmerenCIPS in 1999. Mr. Voss is also an officer at
various of our other affiliates.
David A. Whiteley 46 Senior Vice President 10/12/01
Mr. Whiteley began his career with AmerenUE in 1978 as an engineer and in 1993
was named manager of transmission planning and later manager of electrical
engineering and transmission planning. In 2000, Mr. Whiteley was elected Vice
President of Ameren Services responsible for engineering and construction and
later energy delivery technical services. He was elected to his present position
at AmerenCIPS in 2001. Mr. Whitely is also an officer at various of our other
affiliates.
7
Jerre E. Birdsong 48 Vice President 10/12/01
and Treasurer 07/01/93
Mr. Birdsong joined AmerenUE in 1977 as an economist. He was promoted to
Assistant Treasurer in 1984, Manager of Finance in 1989 and in 1993 was
appointed Treasurer. He was appointed Treasurer of AmerenCIPS in 1997. In
addition to being Treasurer, he was elected to the position of Vice President in
2001. Mr. Birdsong is also an officer at various of our other affiliates,
including Vice President and Treasurer of Ameren.
J.L. Davis 55 Vice President 2/1/03
Mr. Davis joined AmerenCIPS in 1972 as Assistant Engineer in the gas department
and held various other positions until being named Manager of the Gas department
in 1989. Effective with the completion of the merger of AmerenCIPS and AmerenUE
in 1997, Mr. Davis was named Vice President Gas Operations and Engineering
Support for Ameren Services. In 2003, Mr. Davis was elected Vice President of
AmerenCIPS.
Martin J. Lyons 36 Vice President 2/14/03
and Controller 10/22/01
Mr. Lyons was appointed as Controller of AmerenCIPS in October 2001. In addition
to being Controller, he was elected to the position of Vice President in 2003.
He was previously employed by PricewaterhouseCoopers LLP for 13 years, most
recently as partner. Mr. Lyons is also an officer at various of our other
affiliates, including Vice President and Controller of Ameren.
Michael J. Montana* 56 Vice President 4/28/98
Mr. Montana joined AmerenUE as an engineer in 1971 and had also served as
Purchasing Department Buyer from 1973 to 1976, executive assistant from 1976 to
1984, manager of Industrial Relations from 1984 to 1988 and Vice President of
Industrial Relations from 1988 to 1995 of AmerenUE. He was elected Vice
President of Ameren Services in 1997 and Vice President of AmerenCIPS in 1998.
Mr. Montana was elected as an officer of Generating Company in November 2000.
Gilbert W. Moorman* 59 Vice President 6/1/88
Mr. Moorman joined AmerenCIPS as assistant engineer in relay system protection
in 1968. He has since held a series of positions with AmerenCIPS including
planning engineer, power system analyst, manager of system operations and was
elected Vice President of Power Supply in 1988.
Craig D. Nelson 49 Vice President 4/28/98
Mr. Nelson joined AmerenCIPS in 1979 as a tax accountant and was later promoted
to income tax supervisor. He assumed positions of increasing responsibility and
became Treasurer and Assistant Secretary in 1989, Vice President, Corporate
Services in 1996 which position he later relinquished. He served as Vice
President, Merger Coordination at Ameren Services and AmerenCIPS in 1998. He was
elected Vice President, Corporate Planning, Ameren Services in 1999.
Steven R. Sullivan 42 Vice President Regulatory
Policy, General Counsel
and Secretary 11/7/98
Mr. Sullivan was elected Vice President, General Counsel and Secretary of Ameren
in 1998. He was previously employed by Anheuser Busch Companies, Inc. as an
attorney from 1995 to 1998. Mr. Sullivan is also an officer at various of our
other affiliates, including Vice President Regulatory Policy, General Counsel
and Secretary of Ameren.
- --------------
*These individuals retired in 2003.
8
All officers are elected or appointed annually by the Board of Directors
following the election of such Board at the annual meeting of stockholders.
Except for Mr. Steven R. Sullivan and Mr. Martin J. Lyons, each of the
above-named executive officers has been employed by the Company or an affiliate
for more than five years in executive or management positions. Mr. Sullivan was
previously employed, as an attorney, by Anheuser Busch Companies, Inc. Mr. Lyons
was previously employed, as an accountant, by PricewaterhouseCoopers LLP.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
There is no market for our Common Stock since all shares are owned by our
parent, Ameren.
ITEM 6. SELECTED FINANCIAL DATA.
======================================================================================================================
For the Years Ended
December 31 (in millions) 2002 2001 2000(a) 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
Operating Revenues $ 824 $ 840 $ 894 $ 933 $ 856
Operating Income 47 43 91 95 120
Net Income 26 46 79 54 80
Preferred stock dividends 3 4 4 4 4
Net income after preferred
stock dividends 23 42 75 50 76
Common Stock dividends 62 33 54 90 72
As of December 31,
Total assets $1,697 $1,783 $1,867 $1,782 $1,764
Long-term debt 534 579 463 494 528
Total common stockholder's
equity 512 564 555 534 575
========================================================================================================================
(a) On May 1, 2000, we transferred our electric generating assets and related
liabilities, at net book value, to Generating Company, in exchange for a
subordinated promissory note from Generating Company in the principal
amount of $552 million.
9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
Central Illinois Public Service Company, headquartered in Springfield,
Illinois, operates as AmerenCIPS and is a wholly-owned subsidiary of Ameren
Corporation (Ameren). Our principal business is the rate-regulated transmission
and distribution of electricity and the distribution of natural gas to
residential, commercial, industrial and wholesale users in Illinois. Ameren is a
public utility holding company registered with the Securities and Exchange
Commission (SEC) under the Public Utility Holding Company Act of 1935 (PUHCA)
and is headquartered in St. Louis, Missouri. Ameren's 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, Ameren's principal subsidiaries and
our affiliates are as follows:
o Union Electric Company, which operates a rate-regulated electric
generation, transmission and distribution business, and a rate-regulated
natural gas distribution business in Missouri and Illinois as AmerenUE.
o Central Illinois Light Company, a subsidiary of CILCORP Inc. (CILCORP),
which operates a rate-regulated transmission and distribution business, an
electric generation business and a rate-regulated natural gas distribution
business in Illinois as AmerenCILCO. Ameren completed its acquisition of
CILCORP on January 31, 2003 from The AES Corporation (AES). See Recent
Developments for further information.
o AmerenEnergy Resources Company (Resources Company), which consists of non
rate-regulated operations. Subsidiaries include AmerenEnergy Generating
Company (Generating Company) that operates non rate-regulated electric
generation in Missouri and Illinois, AmerenEnergy Marketing Company
(Marketing Company), which markets power for periods over one year,
AmerenEnergy Fuels and Services Company, which procures fuel and manages
the related risks for Ameren-affiliated companies and AmerenEnergy Medina
Valley Cogen (No.4), LLC, which indirectly owns a 40 megawatt, gas-fired
electric co-generation plant. On February 4, 2003, Ameren completed its
acquisition of AES Medina Valley Cogen (No. 4), LLC (Medina Valley) from
AES and renamed it AmerenEnergy Medina Valley Cogen (No. 4), LLC. See
Recent Developments for further information. Generating Company supplies
electric power to Marketing Company which, in turn, supplies us with power
under a power supply agreement (Power Supply Agreement).
o AmerenEnergy, Inc. (AmerenEnergy), which serves as a power marketing and
risk management agent for Ameren-affiliated companies for transactions of
primarily less than one year.
o Electric Energy, Inc. (EEI), which operates electric generation and
transmission facilities in Illinois. On April 30, 2002, after we received
the required approval from the Federal Energy Regulatory Commission (FERC)
and notified the Illinois Commerce Commission (ICC), we transferred our 20%
common stock interest in EEI to Ameren in the form of a non-cash dividend
of common stock in EEI. The book value of our investment in EEI was $1.8
million. Subsequently, Ameren contributed such stock to Resources Company.
This transfer completed the process of achieving a full divestiture of all
electric generating capacity that had been owned directly or indirectly by
us. AmerenUE also owns a 40% interest in EEI.
o Ameren Services Company (Ameren Services), which provides shared support
services to Ameren and its subsidiaries, including us. Charges are based
upon the actual costs incurred by Ameren Services, as required by the
PUHCA.
When we refer to AmerenCIPS, our, we or us, we are referring to Central
Illinois Public Service Company. All tabular dollar amounts are in millions,
unless otherwise indicated.
On May 1, 2000, we transferred our electric generating assets and
liabilities, at historical net book value, to Generating Company (the Transfer).
As a result of the Transfer, our operating revenues only include revenues and
expenses associated with our transmission and distribution operations. In
addition, sales under certain wholesale contracts and interchange sales are no
longer reflected in our operating revenues after May 1, 2000. Purchased power
subsequent to May 2000 reflects the electric Power Supply Agreement with
Marketing Company. See Note 2 - Rate and Regulatory Matters to our Financial
Statements for further discussion.
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.
With nearly all of our revenues directly subject to regulation by various state
and federal agencies, decisions by regulators can have a material impact on the
price we charge for our
10
services. We principally utilize electric power and natural gas in our
operations. The prices for these commodities can fluctuate significantly due to
the world economic and political environment, weather and many other factors. We
do not have a purchased power recovery mechanism in Illinois for our electric
utility business, but we do have a gas cost recovery mechanism for our gas
utility business. In addition, our electric rates in Illinois are largely set
through 2006. 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 transmission and distribution systems, 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
Earnings Summary
Our net income for 2002, 2001 and 2000 was $26 million, $46 million and $79
million, respectively. Net income in 2002 included a voluntary retirement charge
of $9 million, net of taxes, for a voluntary employee retirement program. See
Other Operating Expenses- Restructuring Charges below for further information.
The following table reconciles our net income to net income excluding
voluntary retirement charges for the years ended December 31, 2002, 2001 and
2000:
================================================================================
2002 2001 2000
- --------------------------------------------------------------------------------
Net income $ 26 $ 46 $ 79
Voluntary retirement charges, net of taxes 9 - -
- --------------------------------------------------------------------------------
Net income excluding voluntary retirement charges $ 35 $ 46 $ 79
================================================================================
Excluding the charges discussed above, our net income in 2002 was $35
million (2001 - $46 million; 2000 - $79 million). The decrease in net income
from 2001 to 2002 was primarily due to higher employee benefit costs ($3
million, net of taxes), an increase in our environmental reserve ($2 million,
net of taxes) and increased tree trimming expenses ($1 million, net of taxes)
that resulted in increased operations and maintenance expenses. The decrease was
also attributable to an increase in other taxes ($2 million, net of taxes)
related to revised property tax adjustments in 2001. In addition, less
intercompany interest was received on the Generating Company subordinated
promissory note, associated with the Transfer, as a result of a lower amount
outstanding ($4 million, net of taxes), and earnings from EEI decreased in the
third quarter of 2002 due to the transfer of our common stock interest in EEI
($1 million, net of taxes), which resulted in lower other income and deductions.
These decreases were partially offset by an increase in electric margin ($4
million, net of taxes). See Electric Operations for more information. The
decrease was also slightly offset by reduced injuries and damages expenses due
to resolution of cases that resulted in lower operations expenses ($4 million,
net of taxes). The decrease from 2000 to 2001 was primarily due to decreased
electric margin ($67 million, net of taxes). This decrease was partially offset
by lower operations and maintenance expenses ($15 million, net of taxes) and
lower depreciation expense ($7 million, net of taxes) also resulting from the
Transfer. In addition there was an increase in other income and deductions ($7
million, net of taxes) as a result of intercompany interest received on the
Generating Company subordinated promissory note related to the Transfer. See
Note 2 - Rate and Regulatory Matters to our Financial Statements for further
discussion of the Transfer.
Recent Developments
CILCORP Acquisition
On January 31, 2003, after receipt of the necessary regulatory agency
approvals and clearance from the Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act, Ameren completed its acquisition
of all of the outstanding common stock of CILCORP from AES. CILCORP is the
parent company of Peoria, Illinois-based Central Illinois Light Company, which
operated as CILCO. With the acquisition, CILCO became an Ameren subsidiary, but
remains a separate utility company, operating as AmerenCILCO. On February 4,
2003, Ameren also completed its acquisition of Medina Valley, which indirectly
owns a 40 megawatt, gas-fired electric co-generation plant. With the
acquisition, Medina Valley became a wholly-owned subsidiary of Resources
Company, and was renamed
11
AmerenEnergy Medina Valley Cogen (No. 4), LLC. The CILCORP and AmerenEnergy
Medina Valley Cogen (No. 4), LLC financial statements will be included in
Ameren's consolidated financial statements effective with the January and
February 2003 acquisition dates.
Ameren acquired CILCORP to complement its existing Illinois electric and
gas operations. The purchase included CILCO's rate-regulated electric and
natural gas businesses in Illinois serving approximately 200,000 and 205,000
customers, respectively, of which approximately 150,000 are combination electric
and gas customers. CILCO's service territory is contiguous to our service
territory. CILCO also has a non rate-regulated electric and gas marketing
business principally focused in the Chicago, Illinois region. Finally, the
purchase includes approximately 1,200 megawatts of largely coal-fired generating
capacity, most of which is expected to become non rate-regulated in 2003.
The total purchase price was approximately $1.4 billion and included the
assumption of CILCORP and Medina Valley debt and preferred stock at closing of
approximately $900 million, with the balance of the purchase price of
approximately $500 million paid with Ameren's cash on hand. The purchase price
is subject to certain adjustments for working capital and other changes pending
the finalization of CILCORP's closing balance sheet. The cash component of the
purchase price came from Ameren's issuances in September 2002 of 8.05 million
common shares and in early 2003 of 6.325 million common shares.
Credit Ratings
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's and its subsidiaries' debt under
review. Following the completion of the acquisition of CILCORP in January 2003,
Standard & Poor's lowered the ratings of Ameren Corporation, AmerenUE and us and
increased the ratings of Generating Company. At the same time, Standard & Poor's
changed the outlook assigned to all of Ameren's ratings to stable. Moody's also
lowered Ameren's and AmerenUE's ratings subsequent to the acquisition and
changed the outlook on these ratings to stable. These actions were consistent
with the actions the ratings agencies disclosed they were considering following
Ameren's announcement of the CILCORP acquisition.
As of February 2003, the ratings by Moody's and Standard & Poor's were as
follows:
================================================================================
Moody's Standard & Poor's
- --------------------------------------------------------------------------------
Ameren Corporation:
Issuer/Corporate credit rating A3 A-
Unsecured debt A3 BBB+
Commercial paper P-2 A-2
AmerenUE:
Secured debt A1 A-
Unsecured debt A2 BBB+
Commercial paper P-1 A-2
AmerenCIPS:
Secured debt A1 A-
Unsecured debt A2 BBB+
Generating Company:
Unsecured debt A3/Baa2 A-
================================================================================
Standard & Poor's increased the ratings of CILCORP and CILCO subsequent to
the acquisition of these entities by Ameren. As of February 2003, the unsecured
debt ratings of CILCORP were BBB+ and Baa2 from Standard & Poor's and Moody's,
respectively. The secured debt ratings of AmerenCILCO were A- and A2 from
Standard & Poor's and Moody's, respectively. Standard & Poor's assigned stable
outlooks to the ratings. Moody's also assigned a stable outlook to the ratings
for CILCORP and AmerenCILCO.
Any adverse change in our ratings, Ameren's or AmerenUE's ratings may
reduce our access to capital and/or increase the costs of borrowings resulting
in a negative impact on earnings. A credit rating is not a recommendation to
buy, sell or hold securities and should be evaluated independently of any other
rating. Ratings are subject to revision or withdrawal at any time by the
assigning rating organization.
12
Electric Operations
The following table represents the favorable (unfavorable) impact on
electric margin versus the prior periods for the years ended December 31, 2002
and 2001:
================================================================================
2002 2001
- --------------------------------------------------------------------------------
Operating Revenues:
Effect of abnormal weather (estimate) $14 $ 6
Growth and other (estimate) (23) 31
Wholesale sales - (38)
Interchange sales - (46)
- --------------------------------------------------------------------------------
Total variation in electric operating revenues $(9) $ (47)
- --------------------------------------------------------------------------------
Fuel and Purchased Power:
Generation $ - $ 57
Purchased power 15 (120)
- --------------------------------------------------------------------------------
Total variation in fuel and purchased power $15 $ (63)
- --------------------------------------------------------------------------------
Change in electric margin $ 6 $(110)
================================================================================
Electric margin increased $6 million for the year ended December 31, 2002
compared to 2001 primarily due to more favorable weather conditions and
decreased purchased power costs attributable to lower energy prices.
Weather-sensitive residential sales increased 4% during 2002 as compared to 2001
resulting from warmer summer weather. Partially offsetting the favorable weather
were lower industrial sales that declined 3% for the year and lower commercial
sales that declined 2% for the year due to the impact of the soft economy along
with certain industrial customers electing to switch to our affiliate, Marketing
Company, as their energy supplier.
During 2002, we adopted the provisions of Emerging Issues Task Force (EITF)
Issue No. 02-3, "Issues Involved in Accounting for Derivative Contracts Held for
Trading Purposes and Contracts Involved in Energy Trading and Risk Management
Activities," that required revenues and costs associated with certain energy
contracts to be shown on a net basis in the income statement. Prior to adopting
EITF 02-3 and the rescission of EITF Issue No. 98-10, "Accounting for Contracts
Involved in Energy Trading and Risk Management Activities," 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 - Fuel and Purchased Power. This meant that revenues
were recorded for the notional amount of the power sale contracts with a
corresponding charge to income for the costs of the energy that was generated,
or for the notional amount of a purchased power contract. Upon adoption, EITF
02-3 requires that prior periods also be netted to conform to the current year
presentation. Adoption of EITF 02-3 did not have any impact on operating or net
income for any period or stockholder's equity. We did not have any of these
energy contracts to be netted for 2002 or 2001. SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" was adopted on January 1, 2001
and therefore, no netting was required for the year ended December 31, 2000.
Electric margin decreased $110 million for year ended December 31, 2001
compared to 2000 primarily due to an increase in purchased power partially
offset by decreases in wholesale and interchange sales resulting from the
Transfer. Purchased power costs increased primarily as a result of increased
purchased power under the Power Supply Agreement. Sales under certain wholesale
contacts and interchange sales are no longer reflected in our operating revenues
after May 1, 2000. See Note 2 - Rate and Regulatory Matters to our Financial
Statements for further information about the Transfer.
Gas Operations
Our gas margin increased $4 million in 2002 compared to 2001 due to an $11
million decrease in gas costs attributable to lower natural gas prices and lower
purchases, partially offset by a $7 million decrease in gas revenues. Gas
revenues decreased primarily due to warmer winter weather in the first several
months of 2002 and lower gas costs recovered through the purchased gas
adjustment clause.
Gas margin decreased $7 million in 2001 compared to 2000 due to a $7
million decrease in gas revenues primarily due to lower residential and
commercial sales resulting from unusually warm winter weather. Gas costs in 2001
were comparable to 2000.
13
Other Operating Expenses
Other Operations and Maintenance
Other operations and maintenance expenses in 2002 increased $7 million
compared to 2001 primarily due to higher employee benefit costs related to
increasing healthcare costs and investment performance of employee benefit plan
assets ($5 million), higher tree trimming costs ($2 million), increased routine
repair costs ($2 million) and an increase in the environmental reserve ($3
million), partially offset by the receipt of insurance reimbursements related to
litigation settlements ($7 million). Other operations and maintenance expenses
in 2001 decreased $24 million compared to 2000 primarily due to lower labor
costs ($17 million) and power plant maintenance costs ($15 million) resulting
from the Transfer, partially offset by an increase in employee benefit costs
resulting from increasing healthcare costs and the investment performance of
employee benefit plan assets ($4 million).
Ameren Services provided services to us including wages, employee benefits
and professional services that were included in other operations and maintenance
expenses. See Note 3 - Related Party Transactions to our Financial Statements
for further information.
Restructuring Charges
A charge of $14 million was incurred in 2002 related to Ameren's voluntary
retirement program based on voluntary retirements of approximately 70 of our
employees and additional employees providing support functions to us through
Ameren Services. These costs consisted primarily of special termination benefits
associated with our portion of Ameren's pension and post-retirement benefit
plans. Most of the employees who voluntarily retired will leave Ameren and our
company by March 2003. See Note 8 - Voluntary Retirement Charges to our
Financial Statements for further information.
Depreciation and Amortization
Depreciation and amortization expenses increased $2 million in 2002
compared to 2001 primarily resulting from distribution related additions.
Depreciation and amortization expenses decreased $12 million in 2001 compared to
2000 due to decreased depreciable property, primarily resulting from the
Transfer.
Income Taxes
Income taxes decreased $10 million for 2002 compared to 2001 and decreased
$17 million for 2001 compared to 2000 primarily due to lower pretax income.
Other Taxes
Other tax expense for 2002 increased $4 million compared to 2001 primarily
due to revised property tax assessments in the prior year. Other tax expense for
2001 decreased $15 million compared to 2000 primarily due to lower property and
payroll taxes as a result of the Transfer.
Other Income and Deductions
Other income and deductions (excluding income taxes) decreased $11 million
in 2002 compared to 2001 primarily due to less intercompany interest received on
the Generating Company subordinated promissory note as a result of a lower
amount outstanding ($6 million), lower earnings from EEI due to the transfer of
our 20% common stock interest in EEI to Resources Company on April 30, 2002 ($2
million) and a decrease in contributions in aid of construction ($4 million).
Other income and deductions (excluding income taxes) increased $15 million in
2001 compared to 2000 primarily due to intercompany interest income earned on
the Generating Company subordinated promissory note ($11 million) and an
increase in contributions in aid of construction ($4 million). See Note 2 - Rate
and Regulatory Matters and Note 9 - Miscellaneous, Net to our Financial
Statements for further information.
Interest
Interest expense increased $2 million in 2002 compared to 2001 primarily
due to an increase in interest expense on long-term debt related to a $150
million issuance of long-term debt in 2001 (see Liquidity and Capital Resources
below for further information), partially offset by a decrease in other interest
expense primarily due to less intercompany borrowings from the utility money
pool in 2002 compared to 2001. Interest expense decreased $1 million
14
in 2001 compared to 2000 primarily due to a decrease in the amortization of loss
on reacquired debt in 2001 along with lower interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Operating
Cash provided by operating activities decreased $24 million to $96 million
in 2002 primarily due to decreases in Accounts and Wages payable and other
changes in working capital, lower contributions in aid of construction and
greater pension funding. Cash provided by operating activities totaled $120
million for 2001 compared to $62 million for 2000. Cash provided by operating
activities increased from 2000 to 2001 primarily due to the fluctuations in
working capital requirements including an increase in taxes accrued, resulting
from the timing of tax payments, a decrease in trade receivables due to lower
sales and a decrease in deferred income taxes resulting from the amortization of
the intercompany deferred tax liability related to the Transfer. See Note 2 -
Rate and Regulatory Matters and Note 8 - Voluntary Retirement Charges to our
Financial Statements for further discussion.
Our tariff-based gross margins continue to be our principal source of cash
from operating activities. Our diversified retail customer mix of rate-regulated
residential, commercial and industrial classes and a commodity mix of gas and
electric service provide a reasonably predictable source of cash flows. In
addition, we plan to utilize short-term debt to support normal operations and
other temporary capital requirements.
Pension Funding
Ameren made cash contributions totaling $31 million to its defined benefit
retirement plan during 2002. Our share of the cash contribution made in 2002 was
approximately $4 million, which includes our portion related to Ameren Services.
At December 31, 2002, Ameren recorded a minimum pension liability of $102
million, net of taxes, which resulted in a charge to Accumulated Other
Comprehensive Income (OCI) and a reduction to stockholders' equity. Our share of
the minimum pension liability was approximately $13 million, net of taxes.
Based on the performance of plan assets through December 31, 2002, Ameren
expects to be required under the Employee Retirement Income Security Act of 1974
(ERISA) to fund approximately $150 million to $175 million annually in 2005,
2006 and 2007 in order to maintain minimum funding levels for its pension plans.
In addition, Ameren estimates the pension funding for CILCORP to be less than $1
million in 2003 and approximately $5 million in 2004. We expect our share of the
funding in 2005, 2006 and 2007 to be $21 million to $24 million annually, which
includes our share related to employees of Ameren Services. These amounts are
estimates and may change based on actual stock market performance, changes in
interest rates and any pertinent changes in government regulations. At December
31, 2002, Ameren's Net Benefit Obligation was $1,587 million and its Fair Value
of Plan Assets was $1,059 million. See Benefit Plan Accounting under Accounting
Matters - Critical Accounting Policies below.
Investing
Our net cash used in investing activities was $7 million in 2002
representing construction expenditures for various distribution line upgrades,
partially offset by receipts on our intercompany note receivable from Generating
Company. Cash flows provided by investing activities totaled $16 million for the
year ended December 31, 2001. Cash flows used in investing activities totaled
$41 million for the year ended December 31, 2000. Cash flows provided by
investing activities increased from 2000 to 2001 primarily due to receipts on
our intercompany promissory note receivable from Generating Company relating to
the Transfer, partially offset by increased construction expenditures.
Expenditures for constructing new or improving existing facilities were $57
million for 2002 (2001 - $50 million; 2000 - $41 million). See Note 2 - Rate and
Regulatory Matters to our Financial Statements for further discussion.
For the five-year period 2003 through 2007, construction expenditures are
estimated to approximate $170 million, of which $28 million is expected in 2003.
This estimate includes capital expenditures for transmission and distribution
related activities.
15
Environmental
We are subject to various environmental regulations by federal, state, and
local authorities. From the beginning phases of siting and development, to the
ongoing operation of existing or new electric transmission, and distribution
facilities, our activities involve compliance with diverse laws and regulations
that address impacts to air and water, special, protected, and cultural
resources (such as wetlands, endangered species, and archeological/historical
resources), chemical and waste handling, and noise impacts. Our activities
require complex and often lengthy processes to obtain approvals, permits, or
licenses for new, existing, or modified facilities. Additionally, the use and
handling of various chemicals or hazardous materials (including wastes) requires
preparation of release prevention plans and emergency response procedures. As
new laws or regulations are promulgated, we assess their applicability and
implement the necessary modifications to our facilities or their operations, as
required.
See Note 12 - Commitments and Contingencies to our Financial Statements for
further discussion of environmental matters.
Financing
Our cash flows used in financing activities were $98 million for 2002, $140
million in 2001 and $4 million in 2000. Our principal financing activities for
the three year period included the redemptions of long-term debt and
intercompany notes payable, as well as payments of dividends, partially offset
by the issuance of long-term debt.
We are authorized by the SEC under the PUHCA to have up to $250 million of
short-term unsecured debt instruments outstanding at any time.
Short-Term Debt and Liquidity
Short-term debt typically consists of borrowings under Ameren's utility
money pool agreement but, from time to time, may also consist of commercial
paper and bank loans (maturities generally within 1 to 45 days). At December 31,
2002, Ameren and its subsidiaries had committed credit facilities, expiring at
various dates between 2003 and 2005, totaling $695 million. This amount includes
$15 million of our committed bank lines of credit and $680 million of committed
credit facilities at Ameren and AmerenUE. We access these combined facilities
through Ameren's utility money pool arrangement. AmerenUE and Ameren Services
may also borrow under this arrangement. These committed credit facilities are
also used to support AmerenUE's commercial paper program under which $250
million was outstanding at December 31, 2002. Based on commercial paper
outstanding at December 31, 2002, $445 million was unused and available under
these committed credit facilities and available to us through the utility money
pool.
Subject to the receipt of regulatory approval, which is being pursued,
AmerenCILCO will participate in Ameren's utility money pool arrangement. At
December 31, 2002, CILCO had committed credit facilities, expiring at various
dates during 2003, totaling $60 million.
In July 2002, Ameren entered into new committed credit agreements for $400
million in revolving credit facilities to be used for general corporate
purposes, including support of commercial paper programs. We may access these
new credit facilities through the utility money pool. The $400 million in new
facilities includes a $270 million 364-day revolving credit facility and a $130
million 3-year revolving credit facility. The 3-year facility has a $50 million
sub-limit for the issuance of letters of credit. These new credit facilities
replaced AmerenUE's former $300 million revolving credit facility. These amounts
are included in the total committed credit facilities of $695 million mentioned
above.
In addition to committed credit facilities, a further source of liquidity
for Ameren is available cash and cash equivalents. At December 31, 2002, Ameren
had $628 million of cash, all of which was available for borrowing by us under
the utility money pool. In early 2003, Ameren paid a total of approximately $500
million of cash on hand to acquire CILCORP and Medina Valley.
We rely on access to short-term and long-term capital markets as a
significant source of funding for capital requirements not satisfied by our
operating cash flows. The inability by us to raise capital on favorable terms,
particularly during times of uncertainty in the capital markets, could
negatively impact our ability to maintain and grow our businesses. Based on our
current credit ratings, we believe that we will continue to have access to the
16
capital markets. However, events beyond our control may create uncertainty in
the capital markets such that our cost of capital would increase or our ability
to access the capital markets would be adversely affected.
The following table summarizes available borrowing capacity under committed
lines of credit and credit agreements as of December 31, 2002:
Amount of commitment expiration per period
================================================================================
Total Less than 1 - 3 4 - 5 After 5
committed 1 year years years years
- --------------------------------------------------------------------------------
Lines of credit $ 15 $ 15 $ - - -
Other commercial commitments(a) 680 550 130 - -
- --------------------------------------------------------------------------------
Total $695 $565 $130 - -
================================================================================
(a) Available through utility money pool borrowings.
The following table summarizes our contractual obligations as of December
31, 2002:
================================================================================
Total Less than 1 - 3 4 - 5 After 5
1 year years years years
- --------------------------------------------------------------------------------
Long-term debt $581 $ 45 $ 20 $ 70 $446
Other long-term obligations (a) 93 40 45 8 -
- --------------------------------------------------------------------------------
Total cash contractual obligations $674 $85 $65 $78 $446
================================================================================
(a) Represents purchase contracts for natural gas.
Credit Agreement Provisions and Covenants
Our financial agreements include customary default provisions that could
impact the continued availability of credit or result in the acceleration of
repayment. Many of Ameren's and its subsidiaries' committed credit facilities
require the borrower to represent, in connection with any borrowing under the
facility that no material adverse change has occurred since certain dates. None
of our, Ameren's or AmerenUE's financing arrangements contains credit rating
triggers with the exception of certain ratings triggers within AmerenCILCO's
financing arrangements.
Covenants in Ameren's committed credit facilities require the maintenance
of the percentage of total debt to total capital of 60% or less for Ameren,
AmerenUE and us. As of December 31, 2002, this ratio was approximately 50%, 43%
and 50% for Ameren, AmerenUE and us, respectively. Ameren's committed credit
facilities also include indebtedness cross default provisions that could trigger
a default under these facilities in the event any subsidiary of Ameren (subject
to definition in the underlying credit agreements), other than certain project
finance subsidiaries, defaults on indebtedness in excess of $50 million.
Most of Ameren's and its subsidiaries' committed credit facilities include
provisions related to the funded status of Ameren's pension plan. These
provisions either require Ameren to meet minimum ERISA funding requirements or
limit the unfunded liability status of the plan. Under the most restrictive of
these provisions impacting Ameren's facilities totaling $400 million, an event
of default will result if the unfunded liability status (as defined in the
underlying credit agreements) of Ameren's pension plan exceeds $300 million in
the aggregate. Based on the most recent valuation report available to Ameren at
December 31, 2002, which was based on January 2002 asset and liability
valuations, the unfunded liability status (as defined) was $31 million. While an
updated valuation report will not be available until the second half of 2003,
Ameren believes that the unfunded liability status of its pension plans (as
defined) could exceed $300 million based on the investment performance of the
pension plan assets and interest rate changes since January 1, 2002. As a
result, Ameren may need to renegotiate the facility provisions, terminate or
replace the affected facilities, or fund any unfunded liability shortfall.
Should Ameren elect to terminate these facilities, we believe we would otherwise
have sufficient liquidity to manage our short-term funding requirements.
At December 31, 2002, Ameren and its subsidiaries, including us, were in
compliance with their credit agreement provisions and covenants.
Off-Balance Sheet Arrangements
At December 31, 2002, neither Ameren, nor any of its subsidiaries,
including us, had any off-balance sheet financing arrangements, other than
operating leases entered into in the ordinary course of business. We do not
expect to engage in any significant off-balance sheet financing arrangements in
the near future.
17
Long-Term Debt
The following table summarizes our issuances and redemptions of long-term
debt for the three years ended December 31, 2002, 2001 and 2000. For additional
information related to the terms and uses of these issuances and the sources of
funds and terms for redemptions, see Note 7 - Long-Term Debt to our Financial
Statements.
================================================================================
Month 2002 2001 2000
- --------------------------------------------------------------------------------
Issuances - Issued/Redeemed
- --------------------------------------------------------------------------------
Long-term debt
6.625% Senior secured notes, due 2011 June $ - $150 $ -
Pollution control revenue bonds March - - 51
- --------------------------------------------------------------------------------
Total long-term debt issuances $ - $150 $51
- --------------------------------------------------------------------------------
Redemptions -
- --------------------------------------------------------------------------------
Long-term debt
First mortgage bonds Various $33 $ 30 $35
Environ. improvement bonds, 1990A Series April - - 20
Environ. improvement bonds, 1990B Series April - - 32
- --------------------------------------------------------------------------------
Total long-term debt redemptions $33 $ 30 $87
================================================================================
We expect to fund maturities of long-term debt and contractual obligations
through a combination of cash flow from operations and funds received under the
Generating Company subordinated promissory note receivable.
To issue first mortgage bonds and preferred stock, we must comply with
earnings tests contained in our respective mortgage indenture and Articles of
Incorporation. For the issuance of additional first mortgage bonds, generally,
earnings coverage of twice the annual interest charges on first mortgage bonds
outstanding and to be issued is required. Generally, for the issuance of
additional preferred stock, earnings coverage of one and one-half times annual
interest charges and preferred stock dividends is required under our Articles of
Incorporation. The ability to issue such securities in the future will depend on
coverages at that time. At December 31, 2002, we had and expect to continue to
have adequate coverage ratios for anticipated requirements.
In May 2001, a shelf registration filed by us with the SEC on Form S-3 was
declared effective. This registration statement enables us to offer from time to
time senior secured notes in one or more series with an offering price not to
exceed $250 million. In June 2001, we issued $150 million of the senior secured
notes under the shelf registration statement. At February 13, 2003, the amount
remaining on the shelf registration statement was $100 million.
In December 2001, the interest rate mode on our three series of variable
rate tax-exempt pollution control indebtedness totaling $104 million was
converted to fixed rates ranging from 5% to 5.95% with maturities through 2028.
18
OUTLOOK
We believe there will be challenges to earnings in 2003 and beyond due to
industry-wide trends and company-specific issues. The following are expected to
put pressure on earnings in 2003 and beyond:
o Weak economic conditions, which impact native load demand,
o The adverse effects of rising employee benefit costs and higher insurance
costs, and
o An assumed return to more normal weather patterns.
In late 2002, Ameren announced the following actions to mitigate the effect
of these challenges:
o A voluntary retirement program that was accepted by approximately 550
Ameren employees, including approximately 70 of our employees and
additional employees providing support functions to us through Ameren
Services,
o Modifications to retiree employee benefit plans to increase co-payments and
limit Ameren's overall cost,
o A wage freeze in 2003 for all management employees, including our
employees, and
o Reductions of 2003 expected capital expenditures.
We are pursuing a gas rate increase of approximately $16 million annually
in Illinois. Ameren is also considering additional actions, including
modifications to active employee benefits, further staffing reductions and other
initiatives.
In the ordinary course of business, we evaluate several strategies to
enhance our financial position, results of operations and liquidity. These
strategies may include potential acquisitions, divestitures, opportunities to
reduce costs or increase revenues and other strategic initiatives in order to
increase Ameren's 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.
Labor Agreements
Certain of our employees are represented by the International Brotherhood
of Electrical Workers (IBEW). These employees comprise approximately 70% of our
workforce. Labor agreements covering substantially all employees represented by
the IBEW expire by June 2003. We cannot predict what issues may be raised by the
collective bargaining units and, if raised, whether negotiations concerning such
issues will be successfully concluded.
REGULATORY MATTERS
Illinois
See Note 2 - Rate and Regulatory Matters to our Financial Statements.
Federal - Electric Transmission
See Note 2 - Rate and Regulatory Matters to our Financial Statements.
19
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 the 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
- ----------------- ------------------------------------
Regulatory Mechanisms and Cost Recovery
o Regulatory environment, external regulatory
We defer costs as regulatory assets in decisions and requirements
accordance with SFAS 71 and make o Anticipated future regulatory decisions and their
investments that we assume we will be able impact
to collect in future rates. o Impact of deregulation and competition on
ratemaking process and ability to recover costs
Basis for Judgment
We determine that costs are recoverable based on previous rulings by state
regulatory authorities in jurisdictions where we operate or other factors
that lead us to believe that cost recovery is probable.
Environmental Costs
o Extent of contamination
We accrue for all known environmental o Responsible party determination
contamination, where remediation can be o Approved methods for cleanup
reasonably estimated, but some of our o Present and future legislation and governmental
operations have existed for over 100 years regulations and standards
and previous contamination may be o Results of ongoing research and development
unknown to us. regarding environmental impacts
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 standards and available technology.
Unbilled Revenue
o Projecting customer energy usage
At the end of each period, we estimate, o Estimating impacts of weather and other usage-
based on expected usage, the amount of affecting factors for the unbilled period.
revenue to record for services that have been
provided to customers, but not billed. This
period can be up to one month.
Basis for Judgment
We determine the proper amount of unbilled revenue to accrue each period
based on the volume of energy delivered as valued by a model of billing
cycles and historical usage rates and growth by customer class for our
service area, as adjusted for the modeled impact of seasonal and weather
variations based on historical results.
20
Benefit Plan Accounting
o Future rate of return on pension and other plan assets
Based on actuarial calculations, we accrue o Interest rates used in valuing benefit obligations
costs of providing future employee benefits o Healthcare costs trend rated
in accordance with SFAS 87, 106, and 112. o Timing of employee retirements
See Note 11 - Retirement Benefits to our
Financial Statements.
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.
Impact of Future Accounting Pronouncements
See Note 1 - Summary of Significant Accounting Policies to our Financial
Statements.
EFFECTS OF INFLATION AND CHANGING PRICES
Our rates for retail electric and gas utility services are regulated by the
ICC. Non-retail electric rates are regulated by the FERC. Our Illinois electric
rates are legislatively fixed through January 1, 2007. Inflation affects our
operations, earnings, stockholder's equity and financial performance.
In Illinois, there are no provisions for adjusting rates for changes in the
costs of purchased power. We transferred our generating assets to Generating
Company in May 2000 and rely exclusively on purchased power to supply our
electric customers. See Note 2 - Rate and Regulatory Matters to our Financial
Statements for further information. In Illinois, changes in gas costs are
generally reflected in billings to gas customers through purchased gas
adjustment clauses. See discussion below under Commodity Price Risk for further
information.
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
Ameren's, including our company's, 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. Ameren handles market risks in accordance with established policies,
which may include entering into various derivative transactions. In the normal
course of business, Ameren and our company also face risks that are either
non-financial or non-quantifiable. Such risks principally include business,
legal and operational risks and are not represented in the following discussion.
Ameren's risk management objective is to optimize its physical generating
assets within prudent risk parameters. 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 both long-term and short-term variable-rate debt and fixed-rate debt, and
auction-rate preferred stock. 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.
Utilizing our debt outstanding at December 31, 2002, if interest rates
increased by 1%, our annual interest expense and dividend on preferred stock
would increase by approximately $0.3 million and net income would decrease by
approximately $0.3 million. The model does not consider the effects of the
reduced level of potential overall economic activity that would exist in such an
environment. In the event of a significant change in interest rates, management
would likely take actions to further mitigate our exposure to this market risk.
However, due to
21
the uncertainty of the specific actions that would be taken and their possible
effects, the sensitivity analysis assumes no change in our financial structure.
Commodity Price Risk
We are exposed to changes in market prices for natural gas and purchased
power. With regard to our natural gas utility business, our exposure to changing
market prices is in large part mitigated by the fact that we have a purchased
gas adjustment clause in place in Illinois. This gas cost recovery mechanism
allows us to pass on to our retail customers our prudently incurred costs of
natural gas.
With regard to our exposure to commodity price risk for purchased power,
such price risk is mitigated in part due to the fact that we have entered into
the Power Supply Agreement for purchased power.
Equity Price Risk
We, along with other subsidiaries of Ameren, are a participant in Ameren's
defined benefit plans and post-retirement benefit plans and are responsible for
our proportional share of the costs. Ameren's costs of providing
non-contributory defined benefit retirement and post-retirement benefit plans
are dependent upon a number of factors, such as the rates of return on plan
assets, discount rate, the rate of increase in health care costs and
contributions made to the plans. The market value of Ameren's plan assets has
been affected by declines in the equity market since 2000 for the pension and
post-retirement plans. As a result, at December 31, 2002 Ameren and its
subsidiaries, including us, recognized an additional minimum pension liability
as prescribed by SFAS No. 87, "Employers' Accounting for Pensions." The
liability resulted in a reduction to equity as a result of a charge to Ameren's
OCI of $102 million, net of taxes. Our portion of this charge to OCI was $13
million, net of taxes. The amount of the liability was the result of asset
returns experienced through 2002, interest rates and Ameren's contributions to
the plans during 2002. In future years, the liability recorded, the costs
reflected in net income or OCI, or cash contributions to the plans could
increase materially without a recovery in equity markets in excess of Ameren's
assumed return on plan assets. If the fair value of the plan assets were to grow
and exceed the accumulated benefit obligations in the future, then the recorded
liability would be reduced and a corresponding amount of equity would be
restored in the Balance Sheet. See Liquidity and Capital Resources - Operating.
FORWARD-LOOKING STATEMENTS
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 subsequent
securities filings, could cause results to differ materially from management
expectations as suggested by such "forward-looking" statements:
o the effects of regulatory actions, including changes in regulatory policy;
o the cost of commodities, such as natural gas, and our ability to recover
such increased cost;
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 due to, among other
things, deregulation of certain aspects of our business at both the state
and federal levels;
o the effects of participation in a FERC-approved Regional Transmission
Organization, including activities associated with the Midwest Independent
System Operator;
o availability and future market prices for purchased power, electricity and
natural gas, including the use of financial and derivative instruments and
volatility of changes in market prices;
o average rates for electricity in the Midwest;
o business and economic conditions;
22
o the impact of the adoption of new accounting standards on the application
of appropriate technical accounting rules and guidance;
o interest rates and the availability of capital;
o actions of rating agencies and the effects of such actions;
o weather conditions;
o the impact of strategic initiatives, including acquisitions and
divestitures;
o the impact of current environmental regulations on utilities 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 benefit costs, including changes in returns of
benefit plan assets;
o disruptions of the capital markets or other events making Ameren's and our
access to necessary capital more difficult or costly;
o cost and availability of transmission capacity required to satisfy our
energy sales; and
o legal and administrative proceedings.
Given these uncertainties, undue reliance should not be placed on these
forward-looking statements. Except to the extent required by the federal
securities laws, we undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 7A. QUANTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT MARKET RISK
Information required to be reported by this item is included under
Quantitative and Qualitative Disclosures About Market Risk in Management's
Discussion and Analysis of Financial Conditions and Results of Operations under
Item 7 and Note 13 - Fair Value of Financial Instruments to our Financial
Statements under Item 8.
23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders
of Central Illinois Public Service Company:
In our opinion, the financial statements listed in the index appearing under
Item 15(A)(1) on Page 49 present fairly, in all material respects, the financial
position of Central Illinois Public Service Company at December 31, 2002 and
2001, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America. In addition, in
our opinion, the financial statement schedule listed in the index appearing
under Item 15(A)(2) on Page 49 presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements. These financial statements and the financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and the financial
statement schedule based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
St. Louis, Missouri
February 13, 2003
24
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
BALANCE SHEET
(In millions)
December 31, December 31,
2002 2001
----------- ------------
ASSETS:
Property and plant, net (Note 4) $ 835 $ 822
Investments and other assets:
Intercompany notes receivable - Generating Company (Note 3) 373 419
Intercompany tax receivable - Generating Company (Note 3) 162 177
Other assets 7 17
----------- ------------
Total investments and other assets 542 613
----------- ------------
Current assets:
Cash and cash equivalents 17 26
Accounts receivable - trade (less allowance for doubtful
accounts of $1 and $1, respectively) 53 38
Unbilled revenue 74 81
Intercompany notes receivable (Note 3) 16 24
Miscellaneous accounts and notes receivable (Note 3) 22 37
Current portion of intercompany notes receivable - Generating Company (Note 3) 46 43
Current portion of intercompany tax receivable - Generating Company (Note 3) 13 18
Materials and supplies, at average cost 41 42
Other current assets 7 7
----------- ------------
Total current assets 289 316
----------- ------------
Regulatory assets 31 32
----------- ------------
Total Assets $ 1,697 $ 1,783
=========== ============
CAPITAL AND LIABILITIES:
Capitalization:
Common stock, no par value, 45.0 shares authorized -
25.5 shares outstanding $ 120 $ 120
Retained earnings 405 444
Accumulated other comprehensive income (13) -
----------- ------------
Total common stockholder's equity 512 564
----------- ------------
Preferred stock not subject to mandatory redemption (Note 5) 80 80
Long-term debt, net (Note 7) 534 579
----------- ------------
Total capitalization 1,126 1,223
----------- ------------
Current liabilities:
Current maturities of long-term debt (Note 7) 45 33
Accounts and wages payable (Note 3) 87 114
Accumulated deferred income taxes - 20
Taxes accrued 32 23
Other current liabilities 26 31
----------- ------------
Total current liabilities 190 221
----------- ------------
Commitments and contingencies (Notes 1, 2 and 12)
Accumulated deferred income taxes (Note 3) 282 255
Accumulated deferred investment tax credits 13 12
Regulatory liabilities 15 36
Other deferred credits and liabilities 71 36
----------- ------------
Total Capital and Liabilities $ 1,697 $ 1,783
=========== ============
See Notes to Financial Statements.
25
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF INCOME
(In millions)
Year Ended December 31,
--------------------------------------------------
2002 2001 2000
------------- ------------- -------------
OPERATING REVENUES:
Electric (Note 3) $ 661 $ 670 $ 717
Gas 163 170 177
------------- ------------- -------------
Total operating revenues 824 840 894
------------- ------------- -------------
OPERATING EXPENSES:
Fuel and purchased power (Note 3) 418 433 370
Gas 100 111 111
Other operations and maintenance (Note 3) 161 154 178
Voluntary retirement and other restructuring charges (Note 8) 14 - -
Depreciation and amortization 51 49 61
Income taxes 5 26 44
Other taxes 28 24 39
------------- ------------- -------------
Total operating expenses 777 797 803
------------- ------------- -------------
OPERATING INCOME 47 43 91
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 1 - -
Miscellaneous, net -
Miscellaneous income (Notes 3 and 9) 33 44 29
Miscellaneous expense (Note 9) (2) (1) (1)
Income taxes (12) (1) -
------------- ------------- -------------
Total other income and (deductions) 20 42 28
------------- ------------- -------------
INTEREST CHARGES 41 39 40
------------- ------------- -------------
NET INCOME 26 46 79
PREFERRED STOCK DIVIDENDS 3 4 4
------------- ------------- -------------
NET INCOME AFTER PREFERRED STOCK DIVIDENDS $ 23 $ 42 $ 75
============= ============= =============
See Notes to Financial Statements.
26
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF CASH FLOWS
(In millions)
Year Ended December 31,
--------------------------------------------------
2002 2001 2000
------------- ------------- -------------
Cash Flows From Operating:
Net income $ 26 $ 46 $ 79
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 51 49 61
Amortization of debt issuance costs and premium/discounts 1 1 3
Allowance for funds used during construction 1 - -
Deferred income taxes, net (15) (17) 3
Deferred investment tax credits, net 1 (1) -
Voluntary retirement and other restructuring charges 14 - -
Changes in assets and liabilities:
Receivables, net 7 30 (41)
Materials and supplies 1 (10) (5)
Accounts and wages payable (33) 7 24
Taxes accrued 25 9 (18)
Assets, other 33 (6) 12
Liabilities, other (16) 12 (56)
------------- ------------- -------------
Net cash provided by operating activities 96 120 62
------------- ------------- -------------
Cash Flows From Investing:
Construction expenditures (57) (50) (41)
Allowance for funds used during construction (1) - -
Intercompany notes receivable 51 66 -
------------- ------------- -------------
Net cash provided by (used in) investing activities (7) 16 (41)
------------- ------------- -------------
Cash Flows From Financing:
Dividends on common stock (62) (33) (54)
Dividends on preferred stock (3) (4) (4)
Redemptions:
Long-term debt (33) (30) (87)
Intercompany notes payable - (223) -
Issuances:
Long-term debt - 150 51
Intercompany notes payable - - 90
------------- ------------- -------------
Net cash used in financing activities (98) (140) (4)
------------- ------------- -------------
Net change in cash and cash equivalents (9) (4) 17
Cash and cash equivalents at beginning of year 26 30 13
------------- ------------- -------------
Cash and cash equivalents at end of year $ 17 $ 26 $ 30
=========== ============= ==============
Cash paid during the periods:
Interest $ 40 $ 38 $ 42
Income taxes, net 14 33 58
See Notes to Financial Statements.
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTION:
In the second quarter of 2000, we transferred our electric generating assets and
liabilities, at historical net book value, to a newly created nonregulated
company, AmerenEnergy Generating Company (Generating Company), a subsidiary of
AmerenEnergy Resources Company, in exchange for a promissory note from
Generating Company in the principal amount of $552 million. The transaction also
resulted in a deferred intercompany tax gain liability and related tax
receivable from Generating Company in the amount of $219 million. See Note 2 -
Rate and Regulatory Matters to our Financial Statements for further information.
27
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF COMMON STOCKHOLDER'S EQUITY
(In millions)
December 31, December 31, December 31,
2002 2001 2000
------------- ------------- -------------
Common stock $ 120 $ 120 $ 120
Retained earnings
Beginning balance 444 435 414
Net income 26 46 79
Common stock dividends (62) (33) (54)
Preferred stock dividends (3) (4) (4)
------------- ------------- -------------
405 444 435
------------- ------------- -------------
Accumulated other comprehensive income
Beginning balance - minimum pension liability - - -
Change in minimum pension liability in current period (13) - -
------------- ------------- -------------
(13) - -
------------- ------------- -------------
Total common stockholder's equity $ 512 $ 564 $ 555
============= ============= =============
Comprehensive income, net of taxes
Net income $ 26 $ 46 $ 79
Minimum pension liability adjustment, net of income taxes of
$(9), $-, and $-, respectively (13) - -
------------- ------------- -------------
Total comprehensive income, net of taxes $ 13 $ 46 $ 79
============= ============= =============
See Notes to Financial Statements.
28
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2002
NOTE 1 - Summary of Significant Accounting Policies
General
Central Illinois Public Service Company, headquartered in Springfield,
Illinois, operates as AmerenCIPS and is a wholly-owned subsidiary of Ameren
Corporation (Ameren). Our principal business is the rate-regulated transmission
and distribution of electricity and the distribution of natural gas to
residential, commercial, industrial and wholesale users in Illinois. Ameren is a
public utility holding company registered with the Securities and Exchange
Commission (SEC) under the Public Utility Holding Company Act of 1935 (PUHCA)
and is headquartered in St. Louis, Missouri. Ameren's 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, Ameren's principal subsidiaries and
our affiliates are as follows:
o Union Electric Company, which operates a rate-regulated electric
generation, transmission and distribution business, and a rate-regulated
natural gas distribution business in Missouri and Illinois as AmerenUE.
o Central Illinois Light Company is a subsidiary of CILCORP Inc. (CILCORP),
which operates a rate-regulated transmission and distribution business, an
electric generation business and a rate-regulated natural gas distribution
business in Illinois as AmerenCILCO. Ameren completed its acquisition of
CILCORP on January 31, 2003 from The AES Corporation (AES). See Note 15 -
Subsequent Event for further information.
o AmerenEnergy Resources Company (Resources Company), which consists of non
rate-regulated operations. Subsidiaries include AmerenEnergy Generating
Company (Generating Company) that operates Ameren's non rate-regulated
electric generation in Missouri and Illinois, AmerenEnergy Marketing
Company (Marketing Company), which markets power for periods over one year,
AmerenEnergy Fuels and Services Company, which procures fuel and manages
the related risks for Ameren-affiliated companies and AmerenEnergy Medina
Valley Cogen (No. 4), LLC, which indirectly owns a 40 megawatt, gas-fired
electric co-generation plant. On February 4, 2003, Ameren completed its
acquisition of AES Medina Valley Cogen (No. 4), LLC (Medina Valley) from
AES and renamed it AmerenEnergy Medina Valley Cogen (No. 4), LLC. See Note
15 - Subsequent Event for further information. Generating Company supplies
electric power to Marketing Company which, in turn, supplies us with power
under a power supply agreement (Power Supply Agreement). See Note 2 - Rate
and Regulatory Matters for more information on the Power Supply Agreement.
o AmerenEnergy, Inc. (AmerenEnergy), which serves as a power marketing and
risk management agent for Ameren-affiliated companies for transactions of
primarily less than one year.
o Electric Energy, Inc. (EEI), which operates electric generation and
transmission facilities in Illinois. On April 30, 2002, after we received
the required approval from the Federal Energy Regulatory Commission (FERC)
and notified the Illinois Commerce Commission (ICC), transferred our 20%
common stock interest in EEI to Ameren in the form of a non-cash dividend
of common stock in EEI. The book value of our investment in EEI was $1.8
million. Subsequently, Ameren contributed such stock to Resources Company.
This transfer completed the process of achieving a full divestiture of all
electric generating capacity that had been owned directly or indirectly by
us. AmerenUE also owns a 40% interest in EEI.
o Ameren Services Company (Ameren Services), which provides shared support
services to Ameren and its subsidiaries, including us. Charges are based
upon the actual costs incurred by Ameren Services, as required by the
PUHCA.
When we refer to AmerenCIPS, our, we or us, we are referring to Central
Illinois Public Service Company. All tabular dollar amounts are in millions,
unless otherwise indicated.
On May 1, 2000, we transferred our electric generating assets and
liabilities, at historical net book value, to Generating Company (the Transfer).
See Note 2 - Rate and Regulatory Matters for further discussion.
Our accounting policies conform to generally accepted accounting principles
in the United States (GAAP). Our financial statements reflect all adjustments
(which include normal, recurring adjustments) necessary, in our opinion, for a
fair presentation of our results. The preparation of financial statements in
conformity with GAAP requires
29
management to make certain estimates and assumptions. Such estimates and
assumptions affect reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates. Certain reclassifications have been
made to prior years' financial statements to conform to 2002 reporting.
Our accounting policies conform to generally accepted accounting principles
in the United States (GAAP). Our financial statements reflect all adjustments
(which include normal, recurring adjustments) necessary, in our opinion, for a
fair presentation of our results. The preparation of financial statements in
conformity with GAAP requires management to make certain estimates and
assumptions. Such estimates and assumptions affect reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.
Certain reclassifications have been made to prior years' financial statements to
conform to 2002 reporting.
Regulation
We are subject to regulation by the ICC, the FERC and the SEC. See Note 2 -
Rate and Regulatory Matters for further information.
In accordance with Statement of Financial Accounting Standards (SFAS) No.
71 "Accounting for the Effects of Certain Types of Regulation," we defer certain
costs pursuant to actions of our regulators and are currently recovering such
costs in rates charged to customers.
At December 31, 2002 and 2001, we had recorded the following regulatory
assets and regulatory liabilities:
================================================================================
2002 2001
- --------------------------------------------------------------------------------
Regulatory Assets: Recoverable costs - contaminated facilities(a)(d) $26 $26
Unamortized loss on reacquired debt(b)(d) 5 6
- --------------------------------------------------------------------------------
Regulatory Assets $31 $32
- --------------------------------------------------------------------------------
Regulatory Liabilities: Income taxes(c) $15 $36
================================================================================
(a) Represents the recoverable portion of accrued environmental site
liabilities, which is primarily collected from our electric and gas customers
through our revenue riders in Illinois.
(b) Represents losses related to refunded debt. These amounts are being
amortized over the lives of the related new debt issues or the remaining lives
of the old debt issues if no new debt was issued.
(c) See Note 10 - Income Taxes
for amortization period. Represents unamortized portion of investment tax credit
and federal excess taxes.
(d) These assets do not earn a return.
We continually assess the recoverability of our regulatory assets. Under
current accounting standards, regulatory assets are written off to earnings when
it is no longer probable that such amounts will be recovered through future
revenues. Electric industry restructuring legislation may impact the
recoverability of regulatory assets in the future.
Property and Plant
The cost of additions to and betterments of units of property and plant is
capitalized. Cost includes labor, material, applicable taxes and overheads. An
allowance for funds used during construction is also added for our
rate-regulated assets. Maintenance expenditures and the renewal of items not
considered units of property are expensed as incurred. When units of depreciable
property are retired, the original cost and removal cost, less salvage value,
are charged to accumulated depreciation. See Accounting Changes and Other
Matters relating to SFAS No. 143, "Accounting for Asset Retirement Obligations"
and Note 4 - Property and Plant, Net for further information.
Depreciation
Depreciation is provided over the estimated lives of the various classes of
depreciable property by applying composite rates on a straight-line basis. The
provision for depreciation in 2002, 2001 and 2000 was approximately 3% of the
average depreciable cost.
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Allowance for Funds Used During Construction
Allowance for funds used during construction (AFC) is a utility industry
accounting practice whereby the cost of borrowed funds and the cost of equity
funds (preferred and common stockholders' equity) applicable to our
rate-regulated construction expenditures are capitalized as a cost of
construction. AFC does not represent a current source of cash funds. This
accounting practice offsets the effect on earnings of the cost of financing
current construction, and treats such financing costs in the same manner as
construction charges for labor and materials.
Under accepted ratemaking practice, cash recovery of AFC, as well as other
construction costs, occurs when completed projects are placed in service and
reflected in customer rates. The AFC rates were 9% during 2002, 4% during 2001
and 6% during 2000.
Impairment of Long-Lived Assets
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. See Accounting Changes and Other Matters related to SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets."
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and temporary investments
purchased with an original maturity of three months or less.
Unamortized Debt Discount, Premium and Expense
Discount, premium and expense associated with long-term debt are amortized
over the lives of the related issues.
Revenue
We accrue an estimate of electric and gas revenues for service rendered,
but unbilled, at the end of each accounting period.
Interchange revenues included in Operating Revenues - Electric were $35
million for the year ended December 31, 2002 (2001 - $35 million; 2000 - $81
million). See Emerging Issues Task Force (EITF) Issue No. 02-3, "Issues Involved
in Accounting for Derivative Contracts Held for Trading Purposes and Contracts
Involved in Energy Trading and Risk Management Activities" discussion under
Accounting Changes and Other Matters below for further information.
Purchased Power
Purchased power included in Operating Expenses - Purchased Power was $418
million for the year ended December 31, 2002 (2001 - $433 million; 2000 - $313
million). See EITF 02-3 discussion under Accounting Changes and Other Matters
below for further information.
Fuel and Gas Costs
In Illinois, there are no provisions for adjusting rates for changes in the
costs of purchased power. We transferred our generating assets to Generating
Company in May 2000 and rely exclusively on purchased power to supply our
electric customers. See Note 2 - Rate and Regulatory Matters for further
information. In Illinois, changes in gas costs are generally reflected in
billings to gas customers through our purchased gas adjustment clause.
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Excise Taxes
Excise taxes on our Illinois gas customer bills are imposed on us and are
recorded gross in Operating Revenues and Other Taxes. Excise taxes recorded in
Operating Revenues and Other Taxes for the year ended December 31, 2002 were $13
million (2001 - $12 million; 2000 - $17 million). Excise taxes applicable to
Illinois electric customer bills are imposed on the consumer and are recorded as
tax collections payable and included in Taxes Accrued on the Balance Sheet.
Income Taxes
We are included in the consolidated federal income tax return filed by
Ameren. As a subsidiary of Ameren, we could be considered jointly and severably
liable for assessments of additional tax on the consolidated group. Income taxes
are allocated to us based on our taxable income or loss. Our provision for
income taxes has been presented based on federal and state taxes we would have
presented on a stand-alone company basis. Deferred tax assets and liabilities
are recognized for the tax consequences of transactions that have been treated
differently for financial reporting and tax return purposes, measured using
statutory tax rates.
Investment tax credits utilized in prior years were deferred and are being
amortized over the useful lives of the related properties.
Accounting Changes and Other Matters
In January 2001, we adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The impact of that adoption was immaterial
to us.
In January 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.
We are adopting SFAS 143 in the first quarter of 2003. SFAS 143 provides
the accounting requirements for asset retirement obligations associated with
tangible, long-lived assets. SFAS 143 requires us to record the estimated fair
value of legal obligations associated with the retirement of tangible long-lived
assets in the period in which the liabilities are incurred and to capitalize a
corresponding amount as part of the book value of the related long-lived asset.
In subsequent periods, we are required to adjust asset retirement obligations
based on changes in estimated fair value, and the corresponding increases in
asset book values are depreciated over the useful life of the related asset.
Uncertainties as to the probability, timing or cash flows associated with an
asset retirement obligation affect our estimate of fair value.
We have determined that certain asset retirement obligations exist.
However, we are unable to estimate the fair value of those obligations because
the probability, timing or cash flows associated with the obligations are
indeterminable. We do not believe that these obligations, when incurred, will
have a material adverse impact on our financial position, results of operations
or liquidity.
Historically, we have included an estimated cost of dismantling and
removing plant from service upon retirement. This practice is currently required
by regulators in the jurisdictions in which we operate. As a result, though we
are still assessing the impact of SFAS 143 on our rate-regulated depreciation
methodology, we do not believe any such impact will affect our results of
operations. However, if we are required to remove accrued dismantling and
removal costs from accumulated depreciation, where they are currently embedded,
our asset and liability balances could be materially increased.
On January 1, 2002, we adopted SFAS 144. SFAS 144 addresses the financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 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, "Reporting the Results of Operations
32
- - Reporting the Effects of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions." SFAS 144 did not have any
effect on our financial position, results of operations or liquidity for 2002.
In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."
SFAS 146 requires an entity to recognize, and measure at fair value, a liability
for a cost associated with an exit or disposal activity in the period in which
the liability is incurred and nullifies EITF Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (Including Certain Costs Incurred in a Restructuring)." SFAS 146 is
effective for exit or disposal activities that are initiated after December 31,
2002.
During 2002, we adopted the provisions of EITF 02-3 that required revenues
and costs associated with certain energy contracts to be shown on a net basis in
the income statement. Prior to adopting EITF 02-3 and the rescission of EITF
Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk
Management Activities," 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 - Fuel
and Purchased Power. This meant that revenues were recorded for the notional
amount of the power sale contracts with a corresponding charge to income for the
costs of the energy that was generated, or for the notional amount of a
purchased power contract.
In October 2002, the EITF reached a consensus to rescind EITF No. 98-10.
The effective date for the full rescission of EITF 98-10 was for fiscal periods
beginning after December 15, 2002, with early adoption permitted. In addition,
the EITF reached a consensus in October 2002 that all SFAS 133 trading
derivatives (subsequent to the rescission of EITF 98-10) should be shown net in
the income statement, whether or not physically settled. This consensus applies
to all energy and non-energy related trading derivatives that meet the
definition of a derivative pursuant to SFAS 133. We have adopted and applied
this guidance to 2002 and 2001 which had no impact on previously reported
earnings or stockholder's equity. The adoption of EITF 02-3, the rescission of
EITF 98-10 and the related transition guidance did not result in the netting of
energy contracts and did not have an impact on earnings. For the years ended
December 31, 2002 and 2001 our trading activities were not considered
derivatives and therefore, were not netted.
NOTE 2 - Rate and Regulatory Matters
Illinois Electric
In 2002, all of our Illinois residential, commercial and industrial
customers had choice in electric suppliers.
As a provision of the legislation related to the restructuring of the
Illinois electric industry (the Illinois Law), a rate freeze is in effect
through January 1, 2007. As a result of this extension through January 1, 2007,
we expect to seek to renew or extend the Power Supply Agreement between us and
Marketing Company through the same period. A renewal or extension of the Power
Supply Agreement will depend on compliance with regulatory requirements in
effect at the time, and we cannot predict whether we will be successful in
securing a renewal or extension of this agreement.
In October 2002, we and AmerenUE filed with the ICC a proposal to suspend
collection of transition charges associated with the Illinois Law for the period
commencing June 2003 until at least June 2005. The Illinois Law allows a utility
to collect transition charges from customers that elect to move from bundled
retail rates to market-based rates. Utilities have the right to collect
transition charges throughout the transition period that ends January 1, 2007.
The suspension of collection of transition charges is not expected to have a
material impact on either AmerenUE or us.
Under the Illinois Law, we were subject to a residential electric rate
decrease of up to 5% in 2002 to the extent our rates exceeded the Midwest
utility average. In 2002, 2001 and 2000 our Illinois electric rates were below
the Midwest utility average and therefore were not subject to any electric rate
decrease due to this provision of the Illinois Law.
The Illinois Law also contains a provision requiring that one-half of
excess earnings from the Illinois jurisdiction for the years 1998 through 2006
to be refunded to our customers. Excess earnings are defined as the portion of
the two-year average annual rate of return on common equity in excess of 1.5% of
the two-year average
33
of an Index, as defined in the Illinois Law. The Index is defined as the sum of
the average for the twelve months ended September 30 of the average monthly
yields of the 30-year U.S. Treasury bonds, plus prescribed percentages ranging
from 4% to 7%. Our average rate of return on common equity for the two year
average at December 31, 2002 was 6% as compared to the average index of 12.6%.
No refunds are expected to be required for the period April 1, 2002 through
March 31, 2003. No refunds were required for the periods April 1, 2001 through
May 31, 2002, or April 1, 2000 through March 31, 2001.
In accordance with another provision of the Illinois Law, on May 1, 2000,
following the receipt of all required state and federal regulatory approvals, we
transferred our electric generating assets and liabilities, at historical net
book value, to Generating Company in exchange for a promissory note from
Generating Company in the principal amount of $552 million. As of December 31,
2002, $419 million (2001 - $462 million) of the promissory note was outstanding
including the current portion of $46 million (2001 - $43 million). The
promissory note bears interest at 7% and has a term of five years payable based
on a 10-year amortization. The transferred assets represented generating
capacity of approximately 2,900 megawatts. Approximately 45% of our employees
were transferred to Generating Company as a part of the transaction. The
significant components of the net assets transferred are as follows:
======================================================
Cash $ 6
Other receivable - intercompany 26
Material and supplies 54
Other current assets 6
Property and plant, net 635
- ------------------------------------------------------
Total assets transferred $727
- ------------------------------------------------------
Accounts payable $ 6
Other current liabilities 3
Other deferred credits 2
Deferred investment tax credits 20
Deferred tax liabilities, net 144
- -------------------------------------------------------
Total liabilities transferred $175
- -------------------------------------------------------
Net assets transferred $552
=======================================================
In conjunction with the Transfer, an electric power supply agreement was
entered into between Generating Company and its non-regulated affiliate,
Marketing Company (Generating-Marketing Agreement), both wholly-owned
subsidiaries of Resources Company. Subsequently, Marketing Company entered into
the Power Supply Agreement with our company to supply us sufficient energy and
capacity to meet our obligations as a public utility through December 31, 2004.
The Power Supply Agreement and the Generating-Marketing Agreement may be
terminated upon at least one year's notice given by either party, but in no
event can either agreement 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, we expect to seek to renew or extend the Power Supply
Agreement through the same period. A renewal or extension of the Power Supply
Agreement will depend on compliance with regulatory requirements in effect at
the time, and we cannot predict whether we will be successful in securing a
renewal or extension of this agreement. A portion of the capacity and energy
supplied by Generating Company to Marketing Company will be resold to us for
resale to our native load customers at rates specified by the ICC, which
approximate the historical regulatory rates for generation, or to retail
customers allowed choice of an electric supplier under state law at market-based
prices. We are obligated to pay a capacity charge per megawatt hour per year to
Marketing Company or the greater of our forecasted peak demand or actual demand
plus sales at market-based rates. We are also subject to energy charges per
megawatt hour for all energy sales other than sales at market-based rates.
Charges are paid monthly. There are no production payments linked to initial
issuance or refinancing of debt. Due to the Generating-Marketing Agreement,
Generating Company bears the operating risks, including plant performance,
operations, maintenance, efficiency, employee retention and other matters. There
are no guarantees, bargain purchase options or other terms that may convey to us
the right to use the property, plant and equipment of Generating Company.
34
Through the Power Supply Agreement, we purchased $392 million of power for the
year ended December 31, 2002 (2001 - $413 million; 2000 - $313 million).
As a result of the Transfer and the Power Supply Agreement, our operating
revenues subsequent to May 1, 2000 only include revenues and expenses associated
with our transmission and distribution operations. In addition, sales under
certain wholesale contracts and interchange sales will no longer be reflected in
our operating revenues after May 1, 2000.
As a result of the Transfer, we incurred a deferred intercompany tax gain,
which resulted in an additional deferred tax liability. An intercompany tax
receivable with Generating Company was established for the deferred tax
liability. This asset and liability will be amortized over twenty years. At
December 31, 2002, our deferred tax liability and intercompany tax receivable
was $175 million (2001 - $195 million), including the current portion of $13
million (2001 - $18 million).
Our intercompany note receivable from Generating Company related to the
Transfer totaled approximately $419 million (2001 - $462 million), including the
current portion of $46 million (2001 - $43 million) at December 31, 2002.
Intercompany interest income for the year ended December 31, 2002, totaled
approximately $31 million (2001- $37 million; 2000 - $27 million).
Federal - Electric Transmission
Regional Transmission Organization
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 and are designed to
improve the wholesale power market. Beginning in January 2001, we and AmerenUE,
along with several other utilities, sought approval from the FERC to participate
in an RTO known as the Alliance RTO. We had previously been a member of the
Midwest Independent System Operator (Midwest ISO) and recorded a pretax charge
to earnings in 2000 of $8 million ($5 million, net of taxes) for an exit fee and
other costs when we left that organization. We believed the for-profit Alliance
RTO business model was superior to the not-for-profit Midwest ISO business model
and provided us 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 Midwest ISO to
discuss how the Alliance RTO business model could be accommodated within the
Midwest ISO. In April 2002, after the Alliance RTO and Midwest ISO 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 Midwest ISO 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 Midwest ISO at incremental
cost rather than Midwest ISO's full tariff rates. The FERC also ordered the
Midwest ISO to return the exit fee paid by us and AmerenUE to leave the Midwest
ISO, provided we and AmerenUE return to the Midwest ISO and agree to pay our
proportional share of the startup and ongoing operational expenses of the
Midwest ISO. Moreover, the FERC required the Alliance companies to select the
RTO in which they will participate within thirty days of the order.
Following the April 2002 FERC order, we and AmerenUE have made filings with
the FERC indicating that we would return to the Midwest ISO through a new
independent transmission company, GridAmerica LLC, that was agreed to be formed
by us and AmerenUE, along with subsidiaries of FirstEnergy Corporation and
NiSource Inc. Upon receipt of final FERC approval the definitive agreements
establishing GridAmerica, a subsidiary of National Grid will serve as the
managing member of GridAmerica and will manage the transmission assets of the
three companies and participate in the Midwest ISO on behalf of GridAmerica.
Other Alliance RTO companies announced their intentions to join the PJM
Interconnection LLC (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 Midwest ISO 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 Midwest ISO 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 Midwest ISO immediately begin a process to address the
reliability and rate-barrier issues raised by us and other market participants
in previous filings.
35
The compliance filing to facilitate the formation and operation of
GridAmerica as an independent transmission company within the Midwest ISO, as
contemplated in the July 31, 2002 order of the FERC, was conditionally accepted
by the FERC in an order issued December 19, 2002. In the order, the FERC
approved the return of the $6 million exit fee paid by us to leave the Midwest
ISO with interest once GridAmerica becomes operational. The FERC also approved,
subject to further filings, reimbursement of $36 million to the GridAmerica
companies for expenses incurred to form the Alliance RTO. GridAmerica is
scheduled to become operational in spring 2003.
Until the reliability and rate-barrier issues are resolved as ordered by
the FERC, and the tariffs and other material terms of our participation in
GridAmerica, and GridAmerica's participation in the Midwest ISO, are finalized
and approved by the FERC, we are unable to predict the impact that on-going RTO
developments will have on our financial condition, results of operations or
liquidity.
Standard Market Design Notice of Proposed Rulemaking (NOPR)
On July 31, 2002, the FERC issued a Standard Market Design NOPR. The NOPR
proposes a number of changes to the way the current wholesale transmission
service and energy markets are operated. Specifically, the NOPR calls for all
jurisdictional transmission facilities to be placed under the control of an
independent transmission provider (similar to an RTO), proposes a new
transmission service tariff that provides a single form of transmission service
for all users of the transmission system, including bundled retail load, and
proposes a new energy market and congestion management system that uses
locational marginal pricing as its basis. On November 15, 2002, we filed our
initial comments on the NOPR with the FERC expressing our concern with the
potential impact of the proposed rules in their current form on the cost and
reliability of service to retail customers. We also proposed that certain
modifications be made to the proposed rules in order to protect transmission
owners from the possibility of trapped transmission costs that might not be
recoverable from ratepayers as a result of inconsistent regulatory policies. We
filed additional comments on the remaining sections of the NOPR during the first
quarter of 2003. Until the FERC issues a final rule, management is unable to
predict the ultimate impact on our future financial position, results of
operations or liquidity.
Illinois Gas
In November 2002, we filed a request with the ICC to increase rates for gas
service by approximately $16 million annually. The ICC has until October 2003 to
render a decision on this request.
NOTE 3 - Related Party Transactions
We have transactions in the normal course of business with Ameren and its
other subsidiaries. These transactions are primarily comprised of power
purchases and sales, as well as other services received or rendered.
Intercompany power purchases under the Power Supply Agreement and from EEI, an
affiliate, totaled $418 million for the year ended December 31, 2002 (2001 -
$433 million; 2000 - $331 million). See Note 2 - Rate and Regulatory Matters for
more information about the Power Supply Agreement.
We have the ability to borrow from Ameren and AmerenUE, through a utility
money pool agreement. Ameren Services administers the utility money pool and
tracks internal and external funds separately. Internal funds are surplus funds
contributed to the money pool from participants. The primary source of external
funds for the utility money pool at December 31, 2002 was AmerenUE's commercial
paper program. Through the utility money pool, we can access committed credit
facilities at Ameren and AmerenUE which totaled $680 million at December 31,
2002. These facilities are in addition to our own $15 million in committed
credit facilities. The total amount available to us at any given time from the
utility money pool is reduced by the amount of borrowings by our affiliates but
increased to the extent Ameren, AmerenUE or Ameren Services have surplus funds
and the availability of other external borrowing sources. Surplus funds
providing additional liquidity available to us through the utility money pool
totaled $628 million at December 31, 2002, of which approximately $500 million
was used by Ameren for the acquisition of CILCORP and Medina Valley in early
2003. The availability of funds is also determined by funding requirements and
limits established by the PUHCA. We, along with AmerenUE and Ameren Services,
rely on the utility money pool to coordinate and provide for certain short-term
cash and working capital requirements. Borrowers receiving a loan under the
utility money pool agreement must repay the principal amount of such loan,
together with accrued interest. Interest is calculated at varying rates of
interest depending on the composition of internal and external funds in the
utility money pool. The average interest rate for the utility money pool for the
year ended December 31, 2002 was 1.68% (2001 - 3.95%). Based on outstanding
commercial paper as of
36
December 31, 2002, we had the ability to borrow up to $445 million through the
utility money pool, which was in addition to available cash balances at Ameren.
At December 31, 2002, we had $16 million in intercompany receivables outstanding
(December 31, 2001 - $24 million) through the utility money pool.
Subject to the receipt of regulatory approval, which is being pursued,
AmerenCILCO will participate in Ameren's utility money pool arrangement. At
December 31, 2002, CILCO had committed credit facilities, expiring at various
dates during 2003, totaling $60 million.
Support services provided by Ameren Services, including wages, employee
benefits and professional services, are based on actual costs incurred. For the
year ended December 31, 2002, support services provided by Ameren Services
included in Operating Expenses - Other Operations and Maintenance totaled $61
million (2001 - $54 million; 2000 - $52 million).
As of December 31, 2002, intercompany receivables included in Miscellaneous
Accounts and Notes Receivable were approximately $28 million (2001 - $38
million). As of December 31, 2002, intercompany payables included in Accounts
and Wages Payables totaled approximately $63 million (2001 - $87 million).
We incurred a deferred intercompany tax gain, which resulted in an
additional deferred tax liability when we transferred our electric generating
assets and liabilities at historical net book value to Generating Company in May
2000. An intercompany tax receivable with Generating Company was established for
the deferred tax liability. This asset and liability will be amortized over
twenty years. At December 31, 2002, our deferred tax liability and intercompany
tax receivable was $175 million (2001 - $195 million), including the current
portion of $13 million (2001 - $18 million).
Our intercompany note receivable from Generating Company was approximately
$419 million (2001 - $462 million) including the current portion of $46 million
(2001 - $43 million) as of December 31, 2002. Our intercompany interest income
recorded in Miscellaneous Income was approximately $31 million for the year
ended December 31, 2002 (2001 - $37 million; 2000 - $27 million).
NOTE 4 - Property and Plant, Net
At December 31, 2002 and 2001, property and plant, net consisted of the
following:
================================================================================
2002 2001
- --------------------------------------------------------------------------------
Property and plant, at original cost:
Electric $1,248 $1,219
Gas 290 280
Other 15 5
- --------------------------------------------------------------------------------
$1,553 $1,504
Less accumulated depreciation and amortization 732 693
- --------------------------------------------------------------------------------
821 811
Construction work in progress:
Other 14 11
- --------------------------------------------------------------------------------
Property and plant, net $ 835 $822
================================================================================
37
NOTE 5 - Preferred Stock
At December 31, 2002 and 2001, we had 4.6 million shares of authorized
preferred stock. There were 2 million shares of cumulative preferred and 2.6
million shares of preferred without par value (aggregate stated value not to
exceed $65 million) authorized.
Outstanding preferred stock is entitled to cumulative dividends and is
redeemable, at the option of the issuer, at the prices shown in the following
table as of December 31, 2002 and 2001:
================================================================================
Preferred stock not subject to
mandatory redemption:(a)
Redemption Price
Shares (per share) 2002 2001
- --------------------------------------------------------------------------------
With par value of $100 per share -
4.00% Series 150,000 $101.00 $15 $15
4.25% Series 50,000 102.00 5 5
4.90% Series 75,000 102.00 8 8
4.92% Series 50,000 103.50 5 5
5.16% Series 50,000 102.00 5 5
1993 Auction 300,000 100.00(b) 30 30
6.625% Series 125,000 100.00 12 12
- --------------------------------------------------------------------------------
Total preferred stock outstanding not
subject to mandatory redemption $80 $80
================================================================================
(a) Generally, for the issuance of additional preferred stock, earnings
coverage of one and one-half times annual interest charges and preferred
stock dividends is required under our Articles of Incorporation. At
December 31, 2002, we had and expect to continue to have adequate coverage
ratios for anticipated requirements.
(b) Dividend rates, and the periods during which such rates apply, vary
depending on our selection of certain defined dividend period lengths. The
average dividend rate during 2002 was 2.35%.
NOTE 6 - Short-Term Borrowings
Short-term borrowings typically consist of borrowings under Ameren's
utility money pool agreement but, from time to time, may also consist of
commercial paper and bank loans (maturities generally within 1 to 45 days). We
had committed bank lines of credit totaling $15 million at December 31, 2002. At
December 31, 2002, we had no outstanding short-term borrowings.
At December 31, 2002, Ameren had committed credit facilities, expiring at
various dates between 2003 and 2005, totaling $695 million. This amount includes
$15 million of our committed bank lines of credit and $680 million of committed
credit facilities at Ameren and AmerenUE. We access these combined facilities
through Ameren's utility money pool arrangement. AmerenUE and Ameren Services
may also borrow under this arrangement. These committed credit facilities are
also used to support AmerenUE's commercial paper program under which $250
million was outstanding at December 31, 2002. Based on commercial paper
outstanding at December 21, 2002, $445 million was unused and available under
these committed credit facilities and available to us through the utility money
pool. See Note 3 - Related Party Transactions for further information regarding
the utility money pool.
Subject to the receipt of regulatory approval, which is being pursued,
AmerenCILCO will participate in Ameren's utility money pool arrangement. At
December 31, 2002, CILCO had committed credit facilities, expiring at various
dates during 2003, totally $60 million.
Certain of our and Ameren's financing arrangements contain provisions
which, among other things, limit our ability to encumber or sell assets, merge
with other entities or permit to exist restrictions on our ability to pay
dividends or make other payments to affiliates. Ameren's credit agreements
contain a covenant which requires Ameren, AmerenUE and us to maintain a ratio of
total indebtedness to total capital of 60% or less. Certain of these
arrangements contain material adverse change clauses which could limit our
ability to borrow under such facilities or to access borrowing under these
facilities through the utility money pool. In addition, Ameren's credit
agreements contain indebtedness cross default provisions which could trigger a
default under these facilities in the
38
event any subsidiary of Ameren (subject to definition in the underlying credit
agreements) other than certain project finance subsidiaries defaults in
indebtedness in excess of $50 million. None of our, Ameren's or AmerenUE's
financing arrangements contains credit rating triggers with the exception of
certain ratings triggers within AmerenCILCO's financing arrangements.
Most of Ameren's and its subsidiaries' committed credit facilities include
provisions related to the funded status of Ameren's pension plan. These
provisions either require Ameren to meet minimum ERISA funding requirements or
limit the unfunded liability status of the plan. Under the most restrictive of
these provisions impacting Ameren's facilities totaling $400 million, an event
of default will result if the unfunded liability status (as defined in the
underlying credit agreements) of Ameren's pension plan exceeds $300 million in
the aggregate. Based on the most recent valuation report available to Ameren at
December 31, 2002, which was based on January 2002 asset and liability
valuations, the unfunded liability status (as defined) was $31 million. While an
updated valuation report will not be available until the second half of 2003,
Ameren believes that the unfunded liability status of its pension plans (as
defined) could exceed $300 million based on the investment performance of the
pension plan assets and interest rate changes since January 1, 2002. As a
result, Ameren may need to renegotiate the facility provisions, terminate or
replace the affected facilities, or fund any unfunded liability shortfall.
Should Ameren elect to terminate these facilities, we believe we would otherwise
have sufficient liquidity to manage our short-term funding requirements.
At December 31, 2002, Ameren and its subsidiaries, including us, were in
compliance with all such provisions.
NOTE 7 - Long-Term Debt
The following table summarizes our long-term debt outstanding at December
31, 2002 and 2001:
================================================================================
2002 2001
- --------------------------------------------------------------------------------
First mortgage bonds (a)
- --------------------------------------------------------------------------------
6 3/4% Series Y paid in 2002 $ - $ 23
6.94% Series 97-1 paid in 2002 - 5
6.96% Series 97-1 paid in 2002 - 5
6 3/8% Series Z due 2003 40 40
6.99% Series 97-1 due 2003 5 5
6.49% Series 95-1 due 2005 20 20
7.05% Series 97-2 due 2006 20 20
7 1/2% Series X due 2007 50 50
5.375% Series due 2008 15 15
6.625% Series due 2011 150 150
7.61% 1997 Series due 2017 40 40
6.125% Series due 2028 60 60
- --------------------------------------------------------------------------------
400 433
- --------------------------------------------------------------------------------
Pollution control revenue bonds
- --------------------------------------------------------------------------------
2000 Series A 5.5% due 2014 (b) 51 51
1993 Series C-1 5.95% due 2026 (b) 35 35
1993 Series C-2 5.70% due 2026 25 25
1993 Series A 6 3/8% due 2028 35 35
1993 Series B-1 5% due 2028 (b) 17 17
1993 Series B-2 5.90% due 2028 18 18
- --------------------------------------------------------------------------------
181 181
- --------------------------------------------------------------------------------
Unamortized discount and premium on debt (2) (2)
- --------------------------------------------------------------------------------
Maturities due within one year (45) (33)
- --------------------------------------------------------------------------------
Total long-term debt $534 $579
================================================================================
(a) At December 31, 2002, a majority of the property and plant was mortgaged
under, and subject to the lien of, the indenture pursuant to which the
bonds were issued. Our first mortgage bond indenture contains provisions
that restrict the issuance of additional bonds. These provisions restrict
future first mortgage bond issuance to 60% of unused net bondable property
and previously retired bonds. In addition, net earnings must be at least
twice that of first mortgage bond interest to be able to issue additional
bonds under the indenture. Our indenture also requires a certain level of
maintenance capital expenditures. At December 31, 2002, we were in
compliance with all such provisions.
(b) Variable rate tax-exempt pollution control indebtedness that was converted
to long-term fixed rates.
39
The following table summarizes maturities of long-term debt at December 31,
2002:
==================================================
- --------------------------------------------------
2003 $45
2004 -
2005 20
2006 20
2007 50
Thereafter 446
==================================================
Total $581
==================================================
In July 2002, Ameren entered into new committed credit agreements for $400
million in revolving credit facilities to be used for general corporate
purposes, including support of commercial paper programs. We may access these
new credit facilities through the utility money pool. The $400 million in new
facilities includes a $270 million 364-day revolving credit facility and a $130
million 3-year revolving credit facility. The 3-year facility has a $50 million
sub-limit for the issuance of letters of credit. These new credit facilities
replaced AmerenUE's former $300 million revolving credit facility.
In May 2001, a shelf registration statement filed by us with the SEC on
Form S-3 was declared effective. This registration statement enables us to offer
from time to time senior notes in one or more series with an offering price not
to exceed $250 million. In June 2001, we issued $150 million of senior secured
notes due June 2011 with an interest rate of 6.625%. Until the release date as
described in the senior secured note indenture, the senior secured notes will be
secured by our related series of first mortgage bonds. The proceeds of these
senior secured notes were used to repay short-term debt and first mortgage bonds
maturing in June 2001. At December 31, 2002, the amount remaining on the shelf
registration statement was $100 million.
In December 2001, the interest rate mode on our three series of variable
rate tax-exempt pollution control indebtedness totaling $104 million was
converted to fixed rates ranging from 5% to 5.95% with maturities through 2028.
We expect to fund maturities of long-term debt and contractual obligations
through a combination of cash flow from operations and funds received under the
Generating Company note receivable.
At December 31, 2002, neither Ameren, nor any of its subsidiaries,
including us, had any off-balance sheet financing arrangements. We do not expect
to engage in any significant off-balance sheet financing arrangements in the
near future.
Amortization of debt issuance costs and any premium or discounts of $1
million for the year ended 2002 (2001 - $1 million; 2000 - $3 million) were
included in interest expense in the income statement.
NOTE 8 - Voluntary Retirement Charges
Voluntary retirement charges were $14 million ($9 million, net of taxes).
In December 2002, approximately 550 Ameren employees, which included
approximately 70 of our employees and additional employees providing support
functions to us through Ameren Services, accepted a voluntary retirement program
that was offered to approximately 1,000 of Ameren's 7,400 employees. Eligible
employees had to be age 50 or over, regular, full-time employees and have at
least 10 years of service with Ameren. While we expect to realize significant
long-term savings as a result of this program, we incurred a pretax charge of
$14 million ($9 million, net of taxes) in December 2002 related to the voluntary
retirement program. These costs consisted primarily of special termination
benefits associated with Ameren's pension and post-retirement benefit plans.
40
NOTE 9 - Miscellaneous, Net
Miscellaneous, net for the years ended December 31, 2002, 2001 and 2000
consisted of the following:
================================================================================
2002 2001 2000
- --------------------------------------------------------------------------------
Miscellaneous income:
Interest and dividend income $31 $37 $26
Equity in earnings of subsidiary 1 2 2
Contribution in aid of construction - 4 -
Other 1 1 1
- --------------------------------------------------------------------------------
Total miscellaneous income $33 $44 $29
- --------------------------------------------------------------------------------
Miscellaneous expense:
Other $(2) $(1) $(1)
- --------------------------------------------------------------------------------
Total miscellaneous expense $31 $43 $28
================================================================================
NOTE 10 - Income Taxes
Total income tax expense for 2002 resulted in an effective tax rate of 39%
on earnings before income taxes (38% in 2001 and 36% in 2000).
Principal reasons such rates differ from the statutory federal rate for the
years ended December 31, 2002, 2001 and 2000 were as follows:
================================================================================
2002 2001 2000
- --------------------------------------------------------------------------------
Statutory federal income tax rate 35% 35% 35%
Increases (decreases) from:
Depreciation differences 1 - (2)
Amortization of investment tax credit (3) (1) (1)
State income tax 6 5 4
Other - (1) -
- --------------------------------------------------------------------------------
Effective income tax rate 39% 38% 36%
================================================================================
Components of income tax expense for the years ended December 31, 2002,
2001 and 2000 were as follows:
================================================================================
2002 2001 2000
- --------------------------------------------------------------------------------
Taxes currently payable (principally
federal):
Included in operating expenses $21 $44 $42
Included in other income 12 1 -
- --------------------------------------------------------------------------------
33 45 42
- --------------------------------------------------------------------------------
Deferred taxes (principally federal):
Included in operating expenses--
Depreciation differences (13) (19) (13)
Other (2) 2 16
- --------------------------------------------------------------------------------
(15) (17) 3
- --------------------------------------------------------------------------------
Deferred investment tax credits,
amortization
Included in operating expenses (1) (1) (1)
- --------------------------------------------------------------------------------
Total income tax expense $17 $27 $ 44
================================================================================
In accordance with SFAS 109, "Accounting for Income Taxes," a regulatory
asset, representing the probable recovery from customers of future income taxes,
which is expected to occur when temporary differences reverse,
41
was recorded along with a corresponding deferred tax liability. Also, a
regulatory liability, recognizing the lower expected revenue resulting from
reduced income taxes associated with amortizing accumulated deferred investment
tax credits was recorded. Investment tax credits have been deferred and will
continue to be credited to income over the lives of the related property.
We adjust our deferred tax liabilities for changes enacted in tax laws or
rates. Recognizing that regulators will probably reduce future revenues for
deferred tax liabilities initially recorded at rates in excess of the current
statutory rate, reductions in the deferred tax liability were credited to the
regulatory liability.
Temporary differences gave rise to the following deferred tax assets and
deferred tax liabilities at December 31, 2002 and 2001:
- --------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------
Accumulated deferred income taxes:
Accelerated depreciation $ 105 $ 88
Capitalized taxes and expenses 58 62
Regulatory liabilities, net (15) (33)
Prepayments (9) (6)
Deferred benefit costs (1) (8)
Deferred intercompany tax gain 153 172
Accumulated other comprehensive income (9) -
- --------------------------------------------------------------------------------
Total net accumulated deferred income tax liabilities $ 282 $ 275
================================================================================
NOTE 11 - Retirement Benefits
Ameren has defined benefit and post-retirement plans covering substantially
all of our employees.
Pension
Pension benefits are based on the employees' years of service and
compensation. Ameren's plans are funded in compliance with income tax
regulations and federal funding requirements. We, along with other subsidiaries
of Ameren, are a participant in Ameren's plans and are responsible for our
proportional share of the costs. Our share of the pension costs for 2002 was $3
million (2001- $0.6 million; 2000 - $1 million) of which approximately 24% (2001
- - 20%; 2000 - 23%) were charged to construction accounts.
Ameren made cash contributions totaling $31 million to Ameren's defined
benefit retirement plans during 2002. Our share of the cash contribution made in
2002 was approximately $4 million, which included our portion related to Ameren
Services. At December 31, 2002, Ameren recorded a minimum pension liability of
$102 million, net of taxes, which resulted in a charge to Accumulated Other
Comprehensive Income (OCI) and a reduction in stockholders' equity. Our share of
the minimum pension liability was approximately $13 million, net of taxes. Based
on the performance of plan assets through December 31, 2002, Ameren expects to
be required under the Employee Retirement Income Security Act of 1974 to fund
$150 million to $175 million annually in 2005, 2006 and 2007 in order to
maintain minimum funding levels. In addition, Ameren estimates the pension
funding for CILCORP to be less than $1 million in 2003 and approximately $5
million in 2004. We expect our share of the funding in 2005, 2006 and 2007 to be
$21 million to $24 million annually, which includes our share related to
employees of Ameren Services. These amounts are estimates and may change based
on actual stock market performance, changes in interest rates and any changes in
government regulations. At December 31, 2002, Ameren's Net Benefit Obligation
was $1,587 million and its Fair Value of Plan Assets was $1,059 million.
Ameren's assumptions for actuarial present value of projected benefit
obligations during 2002, 2001 and 2000 were as follows:
================================================================================
2002 2001 2000
- --------------------------------------------------------------------------------
Discount rate at measurement date 6.75% 7.25% 7.50%
Expected return on plan assets 8.50% 8.50% 8.50%
Increase in future compensation 3.75% 4.25% 4.50%
================================================================================
42
Post-Retirement
Ameren's funding policy for post-retirement benefits is to annually fund
the Voluntary Employee Beneficiary Association trusts (VEBA) with the lesser of
net periodic cost or the amount deductible for federal income tax purposes. We,
along with other subsidiaries of Ameren, are a participant in the VEBA, which
covers substantially all of our employees, and are responsible for our
proportional share of the costs. Our share of the post-retirement benefit costs
for 2002 was $12 million (2001- $10 million; 2000 - $5 million) of which
approximately 27% (2001 - 20%) were charged to construction accounts. The ICC
allows the recovery of post-retirement benefit costs in rates to the extent that
such costs are funded.
Ameren's assumptions for the post-retirement benefit plan obligation
measurements for the years ended December 31, 2002, 2001 and 2000 were as
follows:
================================================================================
2002 2001 2000
- --------------------------------------------------------------------------------
Discount rate at measurement date 6.75% 7.25% 7.50%
Expected return on plan assets 8.50% 8.50% 8.50%
Medical cost trend rate (initial) 10.00% 5.25% 5.00%
Medical cost trend rate (ultimate) 5.25% 5.25% 5.00%
================================================================================
NOTE 12 - Commitments and Contingencies
As a result of issues generated in the course of daily business, we are
involved in legal, tax and regulatory proceedings before various courts,
regulatory commissions and governmental agencies, some of which involve
substantial amounts of money. We believe that the final disposition of these
proceedings except as otherwise disclosed in this report and Notes to our
Financial Statements, will not have an adverse material effect on our financial
position, results of operations or liquidity.
Capital Expenditures
We estimate our capital expenditures over the next five years will be
approximately $170 million, including allowance for funds used during
construction and capitalized interest. This estimate includes capital
expenditures for transmission and distribution related activities.
Our capital program is subject to periodic review and revision, and actual
capital costs may vary from the above estimate because of numerous factors.
These factors include changes in business conditions, revised load growth
estimates, changes in environmental regulations, increasing costs of labor,
equipment, and materials, and cost of capital.
Fuel Purchase Commitments
We have existing contracts with pipeline and natural gas suppliers to
provide, transport and store natural gas for distribution. Gas-related contract
cost commitments are approximately $40 million for 2003, $23 million for 2004,
$22 million for 2005, $7 million for 2006 and $1 million for 2007.
Leases
We lease various facilities, office equipment and operating equipment under
operating leases. As of December 31, 2002, rental expense, included in Other
Operations and Maintenance expenses, totaled approximately $10 million (2001 -
$9 million; 2000 - $5 million).
Environmental Matters
We are subject to various environmental regulations by federal, state, and
local authorities. From the beginning phases of siting and development, to the
ongoing operation of existing or new electric transmission and distribution
facilities, our activities involve compliance with diverse laws and regulations
that address emissions and impacts to air and water, special, protected, and
cultural resources (such as wetlands, endangered species, and
archeological/historical resources), chemical and waste handling, and noise
impacts. Our activities require complex and often lengthy processes to obtain
approvals, permits, or licenses for new, existing, or modified facilities.
43
Additionally, the use and handling of various chemicals or hazardous materials
(including wastes) requires preparation of release prevention plans and
emergency response procedures. As new laws or regulations are promulgated, we
assess their applicability and implement the necessary modifications to our
facilities or their operations, as required. The more significant matters are
discussed below.
Remediation
We are involved in a number of remediation actions to clean up hazardous
waste sites as required by federal and state law. Such statutes require that
responsible parties fund remediation actions regardless of fault, legality of
original disposal, or ownership of a disposal site. We have been identified by
the federal or state governments as a potentially responsible party at several
contaminated sites. As part of the Transfer, we have contractually agreed to
indemnify Generating Company for remediation costs associated with pre-existing
environmental contamination at the sites of our former coal plants.
We own or are otherwise responsible for 13 former manufactured gas plant
(MGP) sites in Illinois. The ICC permits the recovery of remediation and
litigation costs associated with certain former MGP sites located in Illinois
from our Illinois electric and natural gas utility customers through
environmental adjustment rate riders. To be recoverable, such costs must be
prudently and properly incurred and are subject to annual reconciliation review
by the ICC. Through December 31, 2002, the total costs deferred, net of
recoveries from insurers and environmental adjustment rate riders, were $26
million.
On July 30, 2002, the Illinois Attorney General's Office advised us that it
would be commencing an enforcement action concerning an inactive waste disposal
site near Coffeen, Illinois, which is the location of a disposal facility
permitted by the IEPA to receive fly ash from Generating Company's Coffeen power
plant. The Illinois Attorney General also notified the disposal facility's
current and former owners as to the proposed enforcement action. The Attorney
General advised that it may initiate an action under CERCLA to recover past
costs incurred at the site ($.3 million) and to obtain a declaratory judgment as
to liability for future costs. Neither Generating Company, nor us, 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.
In addition, our operations, or that of our predecessor companies, involve
the use, disposal and, in appropriate circumstances, the cleanup of substances
regulated under environmental protection laws. We are unable to determine the
impact these actions may have on our financial position, results of operations
or liquidity.
Labor Agreements
Certain of our employees are represented by the International Brotherhood
of Electrical Workers (IBEW). These employees comprise approximately 70% of our
workforce. Labor agreements covering substantially all employees represented by
the IBEW expire by June 2003. We cannot predict what issues may be raised by the
collective bargaining units and, if raised, whether negotiations concerning such
issues will be successfully concluded.
Asbestos-Related Litigation
We, along with Ameren and AmerenUE, have been named, along with numerous
other parties, in a number of lawsuits which have been filed by certain
plaintiffs claiming varying degrees of injury from asbestos exposure. Most have
been filed in the Circuit Court of Madison County, Illinois. The number of total
defendants named in each case is significant with as many as 110 parties named
in a case to as few as six. However, the average number of parties is 54 in the
cases that are currently pending.
The claims filed against the Ameren companies allege injury from asbestos
exposure during the plaintiffs' activities at the Ameren companies' electric
generating plants (in the case of AmerenCIPS, our former plants, which are now
owned by Generating Company). In each lawsuit, the plaintiff seeks unspecified
damages in excess of $50,000, which typically would be shared among the named
defendants. A total of 121 such lawsuits have been filed against the Ameren
companies of which 45 are pending, 14 have been settled and 62 have been
dismissed.
44
Regulation
Regulatory changes enacted and being considered at the federal and state
levels continue to change the structure of the utility industry and utility
regulation, as well as encourage increased competition. At this time, we are
unable to predict the impact of these changes on our future financial position,
results of operations or liquidity. See Note 2 - Rate and Regulatory Matters for
further information.
NOTE 13 - Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and Temporary Investments/Short-Term Borrowings
The carrying amounts approximate fair value because of the short-term
maturity of these instruments.
Preferred Stock
The fair value is estimated based on the quoted market prices for the same
or similar issues.
Long-Term Debt
The fair value is estimated based on the quoted market prices for same or
similar issues or on the current rates offered to us for debt of comparable
maturities.
Carrying amounts and estimated fair values of our financial instruments at
December 31, 2002 and 2001 were as follows:
================================================================================
2002 2001
- --------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- --------------------------------------------------------------------------------
Long-term debt (including current portion) $579 $625 $612 $621
Preferred stock 80 72 80 69
================================================================================
45
NOTE 14 - Segment Information
Our business segments provide electric and gas service in portions of
Illinois. The accounting policies of the segments are the same as those
described in Note 1 - Summary of Significant Accounting Policies. Segment data
includes a charge allocating costs of administrative support services to each of
the segments. These costs are accumulated in a separate Ameren subsidiary,
Ameren Services, which provides a variety of support services to us. We evaluate
the performance of our segments and allocate resources to them, based on
revenues and operating income.
The table below summarizes information about the reported revenues and
operating income of our company for the years ended December 31, 2002, 2001 and
2000:
================================================================================
Electric Gas Total
- --------------------------------------------------------------------------------
2002
- --------------------------------------------------------------------------------
Revenues $ 661 $ 163 $ 824
Operating income 39 8 47
- --------------------------------------------------------------------------------
2001
- --------------------------------------------------------------------------------
Revenues $ 670 $ 170 $ 840
Operating income 36 7 43
- --------------------------------------------------------------------------------
2000
- --------------------------------------------------------------------------------
Revenues $ 717 $ 177 $ 894
Operating income 77 14 91
================================================================================
Specified items included in segment profit/loss for the year ended December
31, 2002, 2001 and 2000:
================================================================================
Electric Gas Total
- --------------------------------------------------------------------------------
2002
- --------------------------------------------------------------------------------
Depreciation, depletion
and amortization expense $ 43 $ 8 $ 51
- --------------------------------------------------------------------------------
2001
- --------------------------------------------------------------------------------
Depreciation, depletion
and amortization expense $ 41 $ 8 $ 49
- --------------------------------------------------------------------------------
2000
- --------------------------------------------------------------------------------
Depreciation, depletion
and amortization expense $ 53 $ 8 $ 61
================================================================================
Specified item related to segment assets as of December 31, 2002, 2001 and
2000:
================================================================================
Electric Gas Total
- --------------------------------------------------------------------------------
2002
- --------------------------------------------------------------------------------
Expenditures for additions
to long-lived assets $ 48 $ 9 $ 57
- --------------------------------------------------------------------------------
2001
- --------------------------------------------------------------------------------
Expenditures for additions
to long-lived assets $ 41 $ 9 $ 50
- --------------------------------------------------------------------------------
2000
- --------------------------------------------------------------------------------
Expenditures for additions
to long-lived assets $ 35 $ 6 $ 41
================================================================================
46
Note 15 - Subsequent Event
On January 31, 2003, after receipt of the necessary regulatory agency
approvals and clearance from the Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act, Ameren completed its acquisition
of all of the outstanding common stock of CILCORP from AES. CILCORP is the
parent company of Peoria, Illinois-based Central Illinois Light Company, which
operated as CILCO. With the acquisition, CILCO became an Ameren subsidiary, but
remains a separate utility company, operating as AmerenCILCO. On February 4,
2003, Ameren also completed its acquisition of Medina Valley which indirectly
owns a 40 megawatt, gas-fired electric co-generation plant. With the
acquisition, Medina Valley became a wholly-owned subsidiary of Resources
Company, and was renamed as AmerenEnergy Medina Valley Cogen (No. 4), LLC. The
CILCORP and AmerenEnergy Medina Valley Cogen (No. 4), LLC financial statements
will be included in Ameren's consolidated financial statements effective with
the January and February 2003 acquisition dates.
Ameren acquired CILCORP to complement its existing Illinois gas and
electric operations. The purchase includes CILCO's rate-regulated electric and
natural gas businesses in Illinois serving approximately 200,000 and 205,000
customers, respectively, of which approximately 150,000 are combination electric
and gas customers. CILCO's service territory is contiguous to our service
territory. CILCO also has a non rate-regulated electric and gas marketing
business principally focused in the Chicago, Illinois region. Finally, the
purchase includes approximately 1,200 megawatts of largely coal-fired generating
capacity, most of which is expected to become non rate-regulated in 2003.
The total purchase price was approximately $1.4 billion and included
Ameren's assumption of CILCORP and Medina Valley debt and preferred stock at
closing of approximately $900 million, with the balance of the purchase price of
approximately $500 million paid with Ameren's cash on hand. The purchase price
is subject to certain adjustments for working capital and other changes pending
the finalization of CILCORP's closing balance sheet. The cash component of the
purchase price came from Ameren's issuances in September 2002 of 8.05 million
common shares and in early 2003 of 6.325 million common shares.
SELECTED QUARTERLY INFORMATION (Unaudited)
- --------------------------------
================================================================================
Net
Income/(Loss)
Quarter Ended Operating Net Available for
Operating Income/ Income/ Common
Revenues (Loss) (Loss) Stockholder
- --------------------------------------------------------------------------------
March 31, 2002 $ 215 $ 3 $ 2 $ 1
March 31, 2001 261 11 11 10
June 30, 2002 187 11 8 7
June 30, 2001 170 9 10 10
September 30, 2002 224 27 24 23
September 30, 2001 229 24 25 24
December 31, 2002 (a) 198 6 (8) (8)
December 31, 2001 180 (1) - (2)
================================================================================
(a) Amounts include voluntary retirement charges of $14 million ($9 million,
net of taxes). See Note 8 - Voluntary Retirement Charges for further
information.
Other impacts to quarterly earnings are due to the effect of weather on sales
and other factors that are characteristic of public utility operations.
47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information concerning directors required to be reported by this item is
included under Item (1): Election of Directors in our 2003 definitive proxy
statement filed pursuant to Regulation 14A and is incorporated herein by
reference.
Information concerning executive officers required by this item is reported
in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
Information required to be reported by this item is included under
Executive Compensation in our 2003 definitive proxy statement filed pursuant to
Regulation 14A and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required to be reported by this item is included under Security
Ownership in our 2003 definitive proxy statement filed pursuant to Regulation
14A and is incorporated herein by reference.
We do not have any equity compensation plans under which our equity
securities are authorized for issuance.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required to be reported by this item is included under Item
(1): Election of Directors in our 2003 definitive proxy statement filed pursuant
to Regulation 14A and is incorporated herein by reference.
ITEM 14. CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as
amended. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective in timely alerting them to material information relating to
AmerenCIPS, which is required to be included in our periodic SEC filings.
There have been no significant changes in our internal controls or in other
factors which could significantly affect internal controls subsequent to the
date we carried out our evaluation.
48
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K.
(A) Financial Statements:
(1) Financial Statements of Central Illinois Public Service Company which
are required to be filed by Item 8 of this report.
Pages Herein
------------
Report of Independent Accountants............................................... 24
Balance Sheet - December 31, 2002 and 2001...................................... 25
Statement of Income - Years Ended December 31, 2002, 2001, and 2000............. 26
Statement of Cash Flows - Years Ended December 31, 2002, 2001, and 2000......... 27
Statement of Common Stockholder's Equity -
Years Ended December 31, 2002, 2001 and 2000.................................... 28
Notes to Financial Statements................................................... 29
(2) Financial Statement Schedule
The following schedule, for the years ended December 31, 2002, 2001
and 2000, should be read in conjunction with the aforementioned financial
state- ments (schedules not included have been omitted because they are not
applicable or the required data is shown in the aforementioned financial
statements).
Pages Herein
------------
Report of Independent Accountants on Financial
Statement Schedule..................................................................... 24
Valuation and Qualifying Accounts (Schedule II)........................................ 53
(3) Exhibits filed with this report are listed on the Exhibit Index.
(B) Reports on Form 8-K.
We filed a report on Form 8-K dated November 27, 2002 regarding the
filing of a request with the ICC for an increase in gas rates.
(C) Exhibits.
Exhibit No. Description
----------- -----------
3.1(i) Restated Articles of Incorporation of Central Illinois
Public Service Company d/b/a AmerenCIPS (AmerenCIPS)
(March 31, 1994 Form 10-Q, Exhibit 3(b)).
3.2(ii) ** By-Laws of AmerenCIPS as amended effective January 21, 2003.
4.1 Indenture of Mortgage or Deed of Trust dated October 1,
1941, from AmerenCIPS to Continental Illinois National Bank
and Trust Company of Chicago and Edmond B. Stofft, as
Trustees (U.S. Bank Trust National Association and Patrick
J. Crowley are successor Trustees) (Exhibit 2.01 in File
No. 2-60232).
49
Exhibit No. Description
----------- -----------
4.2 Supplemental Indentures dated, respectively September 1,
1947, January 1, 1949, February 1, 1952, September 1, 1952,
June 1, 1954, February 1, 1958, January 1, 1959, May 1,
1963, May 1, 1964, June 1, 1965, May 1, 1967, April 1, 1970,
April 1, 1971, September 1, 1971, May 1, 1972, December 1,
1973, March 1, 1974, April 1, 1975, October 1, 1976,
November 1, 1976, October 1, 1978, August 1, 1979, February
1, 1980, February 1, 1986, May 15, 1992, July 1, 1992,
September 15, 1992, April 1, 1993, June 1, 1995, March 15,
1997, June 1, 1997, December 1, 1998 and June 1, 2001
between AmerenCIPS and the Trustees under the Indenture of
Mortgage or Deed of Trust referred to above as Exhibit 4.1
(Amended Exhibit 7(b) in File No. 2-7341; Second Amended
Exhibit 7.03 in File No. 2-7795; Second Amended Exhibit 4.07
in File No. 2-9353; Amended Exhibit 4.05 in file No. 2-9802;
Amended Exhibit 4.02 in File No. 2-10944; Amended Exhibit
2.02 in File No. 2-13866; Amended Exhibit 2.02 in File No.
2-14656; Amended Exhibit 2.02 in File No.2-21345; Amended
Exhibit 2.02 in File No. 2-22326; Amended Exhibit 2.02 in
File No. 2-23569; Amended Exhibit 2.02 in File No. 2-26284;
Amended Exhibit 2.02 in File No. 2-36388; Amended Exhibit
2.02 in File No. 2-39587; Amended Exhibit 2.02 in File No.
2-41468; Amended Exhibit 2.02 in File No. 2-43912; Exhibit
2.03 in File No. 2-60232; Amended Exhibit 2.02 in File No.
2-50146; Amended Exhibit 2.02 in File No. 2-52886; Second
Amended Exhibit 2.04 in File No. 2-57141; Amended Exhibit
2.04 in File No. 2-57557; Amended Exhibit 2.06 in File No.
2-62564; Exhibit 2.02(a) in File No. 2-65914; Amended
Exhibit 2.02(a) in File No. 2-66380; and Amended Exhibit
4.02 in File No. 33-3188; Exhibit 4.02 to Form 8-K dated May
15, 1992; Exhibit 4.02 to Form 8-K dated July 1, 1992;
Exhibit 4.02 to Form 8-K dated September 15, 1992; Exhibit
4.02 to Form 8-K dated March 30, 1993; Exhibit 4.03 to Form
8-K dated June 5, 1995; Exhibit 4.03 to Form 8-K dated March
15, 1997; Exhibit 4.03 to Form 8-K dated June 1, 1997;
Exhibit 4.2, in File No. 333-59438; and Exhibit 4.1 to June
30, 2001 Form 10-Q.)
4.3 Indenture dated as of December 1, 1998 from AmerenCIPS to
The Bank of New York relating to Senior Notes, 5.375% due
2008 and 6.125% due 2028 (File No. 333-59438, Exhibit 4.4).
10.1 * Form of Director's Retirement Income Plan (1990 Form 10-K,
Exhibit 10.04).
10.2 * Form of Excess Benefit Plan (1994 Form 10-K, Exhibit 10.10).
10.3 * Amendment to Form of Excess Benefit Plan (1995 Form 10-K,
Exhibit 10.07).
10.4 * Form of Special Executive Retirement Plan (1994 Form 10-K,
Exhibit 10.11).
10.5 * Amendment to Form of Special Executive Retirement Plan (1995
Form 10-K, Exhibit 10.09).
10.6 * Ameren Corporation (Ameren) Long-Term Incentive Plan of 1998
(Ameren's 1998 Form 10-K, Exhibit 10.1).
10.7 * Ameren Change of Control Severance Plan (Ameren's 1998 Form
10-K, Exhibit 10.2).
10.8 * Ameren Deferred Compensation Plan for Members of the Ameren
Leadership Team as amended and restated effective January 1,
2001 (Ameren's 2000 Form 10-K, Exhibit 10.1).
10.9 * Ameren Deferred Compensation Plan for Members of the Board
of Directors (Ameren's 1998 Form 10-K, Exhibit 10.4).
10.10 * Ameren Executive Incentive Compensation Program Elective
Deferral Provisions for Members of the Ameren Leadership
Team as amended and restated effective January 1, 2001
(Ameren's 2000 Form 10-K, Exhibit 10.2).
10.11 Asset Transfer Agreement between AmerenEnergy Generating
Company (Generating Company) and AmerenCIPS (June 30, 2000
Form 10-Q, Exhibit 10).
10.12 Amended Electric Power Supply Agreement between Generating
Company and AmerenEnergy Marketing Company (Marketing Co.)
(File No. 333-56594, Exhibit 10.2).
50
Exhibit No. Description
----------- -----------
10.13 2nd Amended Electric Power Supply Agreement between
Generating Company and Marketing Co. (Ameren March 31, 2001
Form 10-Q, Exhibit 10.1).
10.14 Electric Power Supply Agreement between Marketing Co. and
AmerenCIPS (File No. 333-56594, Exhibit 10.3).
10.15 Amended Electric Power Supply Agreement between Marketing
Co. and AmerenCIPS (Ameren March 31, 2001 Form 10-Q, Exhibit
10.2).
10.16 Amended Joint Dispatch Agreement among Generating Company,
AmerenCIPS and Union Electric Company d/b/a AmerenUE
(AmerenUE) (File No. 333-56594, Exhibit 10.4).
10.17 Amended and Restated Appendix I ITC Agreement dated February
14, 2003 between the Midwest Independent Transmission System
Operator, Inc. (Midwest ISO) and GridAmerica LLC
(GridAmerica) (Ameren 2002 Form 10-K, Exhibit 10.17).
10.18 Amended and Restated Limited Liability Company Agreement of
GridAmerica dated February 14, 2003 (Ameren 2002 Form 10-K,
Exhibit 10.18).
10.19 Amended and Restated Master Agreement by and among
GridAmerica, GridAmerica Holdings Inc., GridAmerica
Companies and National Grid USA dated February 14, 2003
(Ameren Form 10-K, Exhibit 10.19).
10.20 Amended and Restated Operation Agreement by and among
AmerenUE, AmerenCIPS, American Transmission Systems Inc.,
Northern Indiana Public Service Company and GridAmerica
dated February 14, 2003 (Ameren 2002 Form 10-K, Exhibit
10.20).
12.2 ** Statement of Computations of Ratio of Earnings to Fixed
Charges and Preferred Stock Dividend Requirements.
23.1 ** Consent of Independent Accountants.
99.1 ** Certificate of Chief Executive Officer required by Section
906 of the Sarbanes-Oxley Act of 2002.
99.2 ** Certificate of Chief Financial Officer required by Section
906 of the Sarbanes-Oxley Act of 2002.
- --------------------
* Management compensatory plan or arrangement.
** Filed herewith.
51
Exhibits Available Upon Request
The following instruments defining the rights of holders of certain
unregistered long-term debt of the Company have not been filed with the SEC but
will be furnished upon request.
Loan Agreement dated January 1, 1993, between AmerenCIPS and Illinois
Development Finance Authority (IDFA) in connection with IDFA's
$35,000,000, 6-3/8% Pollution Control Revenue Refunding Bonds (Central
Illinois Public Service Company Project) 1993 Series A, due January 1,
2028.
Loan Agreement dated June 1, 1993, between AmerenCIPS and IDFA in
connection with IDFA's $17,500,000 Pollution Control Revenue Refunding
Bonds, 1993 Series B-1 due June 1, 2028 and $17,500,000 Pollution
Control Revenue Refunding Bonds, 1993 Series B-2 due June 1, 2028.
Loan Agreement dated August 15, 1993, between AmerenCIPS and IDFA in
connection with IDFA's $35,000,000 Pollution Control Revenue Refunding
Bonds, 1993 Series C-1 due August 15, 2026 and $25,000,000 Pollution
Control Revenue Refunding Bonds, 1993 Series C-2 due August 15, 2026.
Loan Agreement dated March 1, 2000, between AmerenCIPS and IDFA in
connection with the IDFA's $51,100,000 Pollution Control Revenue
Refunding Bonds (AmerenCIPS Project) Series 2000A due March 1, 2014.
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 AmerenUE on Forms 8-K, 10-Q and 10-K are on file with the
SEC under File Number 1-2967.
Reports of AmerenEnergy Generating Company on Forms 8-K, 10-Q and 10-K
are on file with the SEC under File Number 333-56594.
Reports of CILCORP Inc. on Forms 8-K, 10-Q and 10-K are on file with
the SEC under File Number 1-8946.
Reports Central Illinois Light Company on Forms 8-K, 10-Q and 10-K are
on file with the SEC under File Number 1-2732.
52
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
Col. A Col. B Col. C Col. D Col. E
------ ------ ------ ------ ------
Additions
---------------------------
(1) (2)
Balance at Charged to Balance at
beginning costs and Charged to end of
of period expenses other accounts Deductions period
---------- ---------- -------------- ---------- ----------
(Note)
Year ended December 31, 2002
Reserves deducted in the balance sheet from
assets to which they apply:
Allowance for doubtful accounts $1,497,251 $5,487,000 $5,724,449 $1,259,802
========== ========== ========== ==========
Year ended December 31, 2001
Reserves deducted in the balance sheet from
assets to which they apply:
Allowance for doubtful accounts $1,776,792 $6,145,000 $6,424,541 $1,497,251
========== ========== ========== ==========
Year ended December 31, 2000
Reserves deducted in the balance sheet from
assets to which they apply:
Allowance for doubtful accounts $1,827,878 $3,100,000 $3,151,086 $1,776,792
========== ========== ========== ==========
Note: Uncollectible accounts charged off, less recoveries.
53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
(Registrant)
Date: March 24, 2003 By /s/ Gary L. Rainwater
-------------------------------------------
Gary. L. Rainwater
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
/s/ Gary L. Rainwater
- --------------------------- President, Chief Executive March 24, 2003
Gary L. Rainwater Officer and Director
(Principal Executive Officer)
/s/ Warner L. Baxter Senior Vice President and March 24, 2003
- --------------------------- Director
Warner L. Baxter (Principal Financial Officer)
/s/ Martin J. Lyons Vice President and Controller March 24, 2003
- --------------------------- (Principal Accounting Officer)
Martin J. Lyons
/s/ Paul A. Agathen Senior Vice President March 24, 2003
- --------------------------- Director
Paul A. Agathen
/s/ Thomas R. Voss Senior Vice President and March 24, 2003
- --------------------------- Director
Thomas R. Voss
/s/ Charles W. Mueller Director March 24, 2003
- ---------------------------
Charles W. Mueller
CERTIFICATIONS
I, Gary L. Rainwater, certify that:
1. I have reviewed this annual report on Form 10-K of Central Illinois
Public Service Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
54
CERTIFICATIONS (CONTINUED)
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 24, 2003 /s/ Gary L. Rainwater
----------------------------------------------
Gary L. Rainwater
Chief Executive Officer
I, Warner L. Baxter, certify that:
1. I have reviewed this annual report on Form 10-K of Central Illinois
Public Service Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
55
CERTIFICATIONS (CONTINUED)
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 24, 2003 /s/ Warner L. Baxter
-----------------------------------------------
Warner L. Baxter
Chief Financial Officer
56
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1(i) Restated Articles of Incorporation of Central Illinois Public
Service Company d/b/a AmerenCIPS (AmerenCIPS) (March 31, 1994
Form 10-Q, Exhibit 3(b)).
3.2(ii) ** By-Laws of AmerenCIPS as amended effective January 21, 2003.
4.3 Indenture of Mortgage or Deed of Trust dated October 1, 1941,
from AmerenCIPS to Continental Illinois National Bank and Trust
Company of Chicago and Edmond B. Stofft, as Trustees (U.S. Bank
Trust National Association and Patrick J. Crowley are successor
Trustees) (Exhibit 2.01 in File No. 2-60232).
4.4 Supplemental Indentures dated, respectively September 1, 1947,
January 1, 1949, February 1, 1952, September 1, 1952, June 1,
1954, February 1, 1958, January 1, 1959, May 1, 1963, May 1,
1964, June 1, 1965, May 1, 1967, April 1, 1970, April 1, 1971,
September 1, 1971, May 1, 1972, December 1, 1973, March 1, 1974,
April 1, 1975, October 1, 1976, November 1, 1976, October 1,
1978, August 1, 1979, February 1, 1980, February 1, 1986, May 15,
1992, July 1, 1992, September 15, 1992, April 1, 1993, June 1,
1995, March 15, 1997, June 1, 1997, December 1, 1998 and June 1,
2001 between AmerenCIPS and the Trustees under the Indenture of
Mortgage or Deed of Trust referred to above as Exhibit 4.1
(Amended Exhibit 7(b) in File No. 2-7341; Second Amended Exhibit
7.03 in File No. 2-7795; Second Amended Exhibit 4.07 in File No.
2-9353; Amended Exhibit 4.05 in file No. 2-9802; Amended Exhibit
4.02 in File No. 2-10944; Amended Exhibit 2.02 in File No.
2-13866; Amended Exhibit 2.02 in File No. 2-14656; Amended
Exhibit 2.02 in File No.2-21345; Amended Exhibit 2.02 in File No.
2-22326; Amended Exhibit 2.02 in File No. 2-23569; Amended
Exhibit 2.02 in File No. 2-26284; Amended Exhibit 2.02 in File
No. 2-36388; Amended Exhibit 2.02 in File No. 2-39587; Amended
Exhibit 2.02 in File No. 2-41468; Amended Exhibit 2.02 in File
No. 2-43912; Exhibit 2.03 in File No. 2-60232; Amended Exhibit
2.02 in File No. 2-50146; Amended Exhibit 2.02 in File No.
2-52886; Second Amended Exhibit 2.04 in File No. 2-57141; Amended
Exhibit 2.04 in File No. 2-57557; Amended Exhibit 2.06 in File
No. 2-62564; Exhibit 2.02(a) in File No. 2-65914; Amended Exhibit
2.02(a) in File No. 2-66380; and Amended Exhibit 4.02 in File No.
33-3188; Exhibit 4.02 to Form 8-K dated May 15, 1992; Exhibit
4.02 to Form 8-K dated July 1, 1992; Exhibit 4.02 to Form 8-K
dated September 15, 1992; Exhibit 4.02 to Form 8-K dated March
30, 1993; Exhibit 4.03 to Form 8-K dated June 5, 1995; Exhibit
4.03 to Form 8-K dated March 15, 1997; Exhibit 4.03 to Form 8-K
dated June 1, 1997; Exhibit 4.2, in File No. 333-59438; and
Exhibit 4.1 to June 30, 2001 Form 10-Q.)
4.3 Indenture dated as of December 1, 1998 from AmerenCIPS to The
Bank of New York relating to Senior Notes, 5.375% due 2008 and
6.125% due 2028 (File No. 333-59438, Exhibit 4.4).
10.1 * Form of Director's Retirement Income Plan (1990 Form 10-K,
Exhibit 10.04).
10.2 * Form of Excess Benefit Plan (1994 Form 10-K, Exhibit 10.10).
10.3 * Amendment to Form of Excess Benefit Plan (1995 Form 10-K, Exhibit
10.07).
10.4 * Form of Special Executive Retirement Plan (1994 Form 10-K,
Exhibit 10.11).
10.5 * Amendment to Form of Special Executive Retirement Plan (1995 Form
10-K, Exhibit 10.09).
10.6 * Ameren Corporation (Ameren) Long-Term Incentive Plan of 1998
(Ameren's 1998 Form 10-K, Exhibit 10.1).
10.7 * Ameren Change of Control Severance Plan (Ameren's 1998 Form 10-K,
Exhibit 10.2).
10.8 * Ameren Deferred Compensation Plan for Members of the Ameren
Leadership Team as amended and restated effective January 1, 2001
(Ameren's 2000 Form 10-K, Exhibit 10.1).
57
Exhibit No. Description
- ----------- -----------
10.9 * Ameren Deferred Compensation Plan for Members of the Board of
Directors (Ameren's 1998 Form 10-K, Exhibit 10.4).
10.10 * Ameren Executive Incentive Compensation Program Elective Deferral
Provisions for Members of the Ameren Leadership Team as amended
and restated effective January 1, 2001 (Ameren's 2000 Form 10-K,
Exhibit 10.2).
10.11 Asset Transfer Agreement between AmerenEnergy Generating Company
(Generating Company) and AmerenCIPS (June 30, 2000 Form 10-Q,
Exhibit 10).
10.12 Amended Electric Power Supply Agreement between Generating
Company and AmerenEnergy Marketing Company (Marketing Co.) (File
No. 333-56594, Exhibit 10.2).
10.13 2nd Amended Electric Power Supply Agreement between Generating
Company and Marketing Co. (Ameren March 31, 2001 Form 10-Q,
Exhibit 10.1).
10.14 Electric Power Supply Agreement between Marketing Co. and
AmerenCIPS (File No. 333-56594, Exhibit 10.3).
10.15 Amended Electric Power Supply Agreement between Marketing Co. and
AmerenCIPS (Ameren March 31, 2001 Form 10-Q, Exhibit 10.2).
10.16 Amended Joint Dispatch Agreement among Generating Company,
AmerenCIPS and Union Electric Company d/b/a AmerenUE (AmerenUE)
(File No. 333-56594, Exhibit 10.4).
10.21 Amended and Restated Appendix I ITC Agreement dated February 14,
2003 between the Midwest Independent Transmission System
Operator, Inc. (Midwest ISO) and GridAmerica LLC (GridAmerica)
(Ameren 2002 Form 10-K, Exhibit 10.17).
10.22 Amended and Restated Limited Liability Company Agreement of
GridAmerica dated February 14, 2003 (Ameren 2002 Form 10-K,
Exhibit 10.18).
10.23 Amended and Restated Master Agreement by and among GridAmerica,
GridAmerica Holdings Inc., GridAmerica Companies and National
Grid USA dated February 14, 2003 (Ameren Form 10-K, Exhibit
10.19).
10.24 Amended and Restated Operation Agreement by and among AmerenUE,
AmerenCIPS, American Transmission Systems Inc., Northern Indiana
Public Service Company and GridAmerica dated February 14, 2003
(Ameren 2002 Form 10-K, Exhibit 10.20).
12.2 ** Statement of Computations of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements.
23.1 ** Consent of Independent Accountants.
99.1 ** Certificate of Chief Executive Officer required by Section 906 of
the Sarbanes-Oxley Act of 2002.
99.2 ** Certificate of Chief Financial Officer required by Section 906 of
the Sarbanes-Oxley Act of 2002.
- --------------------
* Management compensatory plan or arrangement.
** Filed herewith.
58
Exhibits Available Upon Request
The following instruments defining the rights of holders of certain
unregistered long-term debt of the Company have not been filed with the SEC but
will be furnished upon request.
Loan Agreement dated January 1, 1993, between AmerenCIPS and Illinois
Development Finance Authority (IDFA) in connection with IDFA's
$35,000,000, 6-3/8% Pollution Control Revenue Refunding Bonds (Central
Illinois Public Service Company Project) 1993 Series A, due January 1,
2028.
Loan Agreement dated June 1, 1993, between AmerenCIPS and IDFA in
connection with IDFA's $17,500,000 Pollution Control Revenue Refunding
Bonds, 1993 Series B-1 due June 1, 2028 and $17,500,000 Pollution
Control Revenue Refunding Bonds, 1993 Series B-2 due June 1, 2028.
Loan Agreement dated August 15, 1993, between AmerenCIPS and IDFA in
connection with IDFA's $35,000,000 Pollution Control Revenue Refunding
Bonds, 1993 Series C-1 due August 15, 2026 and $25,000,000 Pollution
Control Revenue Refunding Bonds, 1993 Series C-2 due August 15, 2026.
Loan Agreement dated March 1, 2000, between AmerenCIPS and IDFA in
connection with the IDFA's $51,100,000 Pollution Control Revenue
Refunding Bonds (AmerenCIPS Project) Series 2000A due March 1, 2014.
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 AmerenUE on Forms 8-K, 10-Q and 10-K are on file with the SEC
under File Number 1-2967.
Reports of AmerenEnergy Generating Company on Forms 8-K, 10-Q and 10-K
are on file with the SEC under File Number 333-56594.
Reports of CILCORP Inc. on Forms 8-K, 10-Q and 10-K are on file with the
SEC under File Number 1-8946.
Reports Central Illinois Light Company on Forms 8-K, 10-Q and 10-K are on
file with the SEC under File Number 1-2732.
59
Exhibit 3.2(ii)
BYLAWS
AS AMENDED
TO AND INCLUDING
JANUARY 21, 2003
CENTRAL ILLINOIS
PUBLIC SERVICE
COMPANY
BYLAWS
OF
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
ARTICLE I
SHARES AND TRANSFERS
Section 1. Each holder of duly paid shares of the Company shall be entitled
to a certificate or certificates stating the number and class of shares owned by
such holder. Such certificates shall be signed by the appropriate officers of
the Company (which, in the absence of contrary action by the Board, shall be the
President or any Vice President and the Secretary or any Assistant Secretary of
the Company); shall be sealed with the corporate seal of the Company, which seal
may be facsimile; and shall be countersigned by a Transfer Agent, and
countersigned and registered by a Registrar, appointed by the Board. If a
certificate is countersigned by a Transfer Agent and countersigned and
registered by a Registrar, other (in each case) than the Company itself or its
employee, the signature of either or both of such officers of the Company, and
the countersignature of any such Transfer Agent or its officer or employee, may
be facsimiles. In case any officer of the Company, or any officer or employee of
a Transfer Agent, who has signed or whose facsimile signature has been placed
upon any such certificate shall cease to be an officer of the Company or an
officer or an employee of the Transfer Agent, as the case may be, before such
certificate is issued, the certificate may be issued by the Company with the
same effect as if such officer of the Company or such officer or employee of the
Transfer Agent had not ceased to be such at the date of issue of such
certificate.
Section 2. Shares shall be transferable only on the books of the Company
and upon proper endorsement and surrender of the outstanding certificate or
certificates representing such shares. If an outstanding certificate shall be
lost, destroyed or stolen, the holder thereof may have a new certificate upon
producing evidence satisfactory to the Company of such loss, destruction or
theft and upon furnishing to the Company, the Transfer Agent and the Registrar
indemnity deemed sufficient by the Company.
Section 3. Notwithstanding the foregoing provisions of this Article I, the
Board of Directors may also provide by resolution that some or all of any or all
classes and series of its shares shall be uncertificated shares, provided that
such resolution shall not apply to shares represented by a certificate until
such certificate is surrendered to the Company. Except as otherwise provided by
statute, the rights and obligations of the holders of uncertificated shares and
the rights and obligations of the holders of certificates representing shares of
the same class and series shall be identical.
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ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. The annual meeting of the shareholders shall be held on the
fourth Tuesday in April of each year (or if such day shall be a legal holiday,
then upon the next succeeding day not a legal holiday) or upon such other day
determined by resolution of the Board of Directors. Each such regular annual
meeting shall be held at such time and at such location, within or without the
State of Illinois, as the Board of Directors shall order. At such annual
meeting, a board of directors shall be elected and such other business shall be
transacted as may properly come before such meeting.
Section 2. Special meetings of the shareholders may be called by the
President, by the Board of Directors, by the holders of not less than one-fifth
of all the outstanding shares entitled to vote on the matter for which the
meeting is called, or in such other manner as may be provided by statute. Each
such special meeting shall be held at such location, within or without the State
of Illinois, as the Board of Directors shall order.
Section 3. Written notice of the place, day and hour of each meeting of
shareholders and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given to each shareholder of record
entitled to vote at such meeting. Such notice shall be sent by mail to each such
shareholder, at the address of such shareholder as it appears on the records of
the Company, not less than ten days or more than sixty days before the date of
the meeting, except in cases where some other special method of notice may be
required by statute, in which case the statutory method shall be followed.
Notice of any meeting of the shareholders may be waived by any shareholder.
Attendance of a shareholder (either in person or by proxy) at any meeting shall
constitute waiver of notice thereof unless the shareholder (in person or by
proxy, as the case may be) at the meeting objects to the holding of the meeting
because proper notice was not given.
Section 4. At any shareholders' meeting a majority of the shares
outstanding and entitled to vote on the matter (excluding such shares as may be
owned by the Company) must be represented (either in person or by proxy) in
order to constitute a quorum for consideration of such matter, but the
shareholders represented at any meeting, though less than a quorum, may adjourn
the meeting to some other day or sine die. If a quorum is present (either in
person or by proxy) at a shareholders' meeting, the affirmative vote of the
holders of the majority of shares represented at the meeting and entitled to
vote on a matter shall be the act of the shareholders, unless the vote of a
greater number or voting by classes shall be required by law or the Articles of
Incorporation.
Section 5. The President and Secretary of the Company shall act as Chairman
and Secretary, respectively, of each shareholders' meeting, unless the
shareholders represented at the meeting shall otherwise decide.
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Section 6. (a) (1) Nominations of persons for election to the Board of
Directors of the Company and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a) pursuant to
the Company's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the Company who was a stockholder of
record at the time of giving of' notice provided for in this Bylaw, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Bylaw.
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (a) (1) of
this Bylaw, the stockholder must have given timely notice thereof in writing to
the Secretary of the Company and such other business must otherwise be a proper
matter for stockholder action. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the Company not
later than the close of business on the 60th day nor earlier than the close of
business on the 90th day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the annual
meeting is more than 30 days before or more than 60 days after such anniversary
date, notice by the stockholder to be timely must be so delivered not earlier
than the close of business on the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day prior to such
annual meeting or the 10th day following the day on which public announcement of
the date of such meeting is first made by the Company. In no event shall the
public announcement of an adjournment of an annual meeting commence a new time
period for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or re-election as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (b) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the Company's
books, and of such beneficial owner and (ii) the class and number of shares of
the Company which are owned beneficially and of record by such stockholder and
such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (a) (2)
of this Bylaw to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Company is increased and there is no
public announcement by the Company naming all of the nominees for director or
specifying the size of the increased Board of Directors at least 70 days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by this Bylaw shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal executive offices of the Company
not later than the close of business on
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the 10th day following the day on which such public announcement is first made
by the Company.
(b) Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Company's notice of meeting. Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the Company's notice of meeting (1) by or at the
direction of the Board of Directors or (2) provided that the Board of Directors
has determined that directors shall be elected at such meeting, by any
stockholder of the Company who is a stockholder of record at the time of giving
of notice provided for in this Bylaw, who shall be entitled to vote at the
meeting and who complies with the notice procedures set forth in this Bylaw. In
the event the Company calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Company's notice of meeting, if the
stockholder's notice required by paragraph (a) (2) of this Bylaw shall be
delivered to the Secretary, at the principal executive offices of the Company
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as described
above.
(c) (1) Only such persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Bylaw. Except as otherwise provided by statute, the Articles of
Incorporation or these Bylaws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Bylaw and, if any proposed
nomination or business is not in compliance with this Bylaw, to declare that
such defective proposal or nomination shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Company with the Securities and Exchange Commission pursuant to Section 13, 14
or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in this
Bylaw. Nothing in this Bylaw shall be deemed to affect any rights (a) of
stockholders to request inclusion of proposals in the Company's proxy statement
pursuant to Rule 14a-8 under the Exchange Act or (b) of the holders of any
series of Preferred Stock to elect directors under specified circumstances.
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ARTICLE III
BOARD OF DIRECTORS
Section 1. The business and affairs of the Company shall be managed by or
under the direction of the Board of Directors consisting of not less than four
or more than fifteen members. The exact number of directors within the minimum
and maximum limitations specified in the preceding sentence shall be fixed from
time to time by the Board of Directors pursuant to a resolution adopted by a
majority of the entire Board of Directors. The Board of Directors shall be
elected at each annual meeting of the shareholders, but, if for any reason the
election shall not be held at an annual meeting, it may be subsequently held at
any special meeting of the shareholders after proper notice. Directors so
elected shall hold office until the next succeeding annual meeting of
shareholders or until their respective successors, willing to serve, shall have
been elected and qualified. Any vacancy occurring in the Board of Directors
arising between meetings of shareholders by reason of an increase in the number
of directors or otherwise may be filled by a majority of the members of the
Board.
Section 2. A meeting of the Board of Directors shall be held on the same
date as the annual meeting of shareholders in each year, at the same place where
such annual meeting shall have been held or at such other place as shall be
determined by the Board. Regular meetings of the Board shall be held in such
place, within or without the State of Illinois, and on such dates each year as
shall be established from time to time by the Board. Notice of every such
regular meeting of the Board, stating the place, day and hour of the meeting,
shall be given to each director personally, or by telegraph or other written
means of electronic communication, or by depositing the same in the mails
properly addressed, at least two days before the date of such meeting. Except
where required by statute, neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board need be specified in the
notice or waiver of notice of such meeting.
Section 3. Special meetings of the Board of Directors may be called at any
time by the President, or by a Vice President, when acting as President, or by
any two directors. Notice of such meeting, stating the place, day and hour of
the meeting shall be given to each director personally in writing, or by
telegraph or other written means of electronic communication, or by depositing
the same in the mails properly addressed, or orally promptly confirmed by
written notice in any one of the aforesaid forms, not less than the day prior to
the date of such meeting.
Section 4. Notice of any meeting of the Board may be waived by any
director. Attendance of a director at any meeting shall constitute waiver of
notice of such meeting except where a director attends a meeting for the express
purpose of objecting to the transaction of any business at the meeting because
the meeting is not lawfully called or convened.
Section 5. A majority of the Board of Directors shall constitute a quorum
for the transaction of business at any meeting of the Board, but less than a
majority of the Board may adjourn the meeting to some other day or sine die. The
act of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board unless the vote of
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a greater number or the vote of any class of directors shall be required by the
Articles of Incorporation. The President of the Company shall act as Chairman at
each meeting of the Board but, in the President's absence, one of the directors
present at the meeting who shall have been elected for the purpose by majority
vote of those directors in attendance shall act as Chairman; and the Secretary
of the Company, or in the Secretary's stead, an Assistant Secretary shall act as
Secretary at each such meeting. The members of the Board shall receive such
compensation as the Board may from time to time by resolution determine.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
Section 1. A majority of directors may appoint committees, standing or
special, from time to time from among members of the Board, and confer powers on
such committees and revoke such powers and terminate the existence of such
committees at its pleasure.
Section 2. Meetings of any committee may be called in such manner and may
be held at such times and places as such committee may by resolution determine,
provided that a meeting of any committee may be called at any time by the
President of the Company. Members of all committees shall receive such
compensation as the Board of Directors may from time to time by resolution
determine.
Section 3. Each committee shall have such authority of the Board of
Directors as shall be granted to it by the Board; provided, however, a committee
may not take any action not permitted to be taken by a committee pursuant to the
Business Corporation Act of 1983, as amended from time to time.
ARTICLE V
OFFICERS
Section 1. There shall be elected by the Board of Directors (if practicable
at its first meeting after the annual election of directors in each year) the
following principal officers, namely: A President, such number of Vice
Presidents as the Board may from time to time decide upon (any one or more of
whom may be designated as Executive Vice President, Senior Vice President or
otherwise), a Secretary, a Treasurer and a Controller. References in these
Bylaws to Vice Presidents shall include any such Executive Vice President,
Senior Vice President or other Vice President, however denominated. The Board
may in its discretion also elect such other officers as may from time to time be
provided for by the Board. Any two or more offices may be held by the same
person. All officers, unless sooner removed, shall hold their respective offices
until the first meeting of the Board of Directors after the next succeeding
annual election of directors and until their successors, willing to serve, shall
have been elected, but any officer, including any officer appointed by the
President as provided in Section 2 of this Article V, may
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be removed from office at the pleasure of the Board. Election or appointment of
an officer shall not of itself create contract rights.
Section 2. The President shall be the chief executive officer of the
Company and shall have the general management and direction, subject to the
control of the Board of Directors, of the business of the Company, including the
power to appoint and to remove and discharge any and all assistant officers,
agents and employees of the Company not elected or appointed directly by the
Board of Directors. The President may execute for and on behalf of the Company
any contracts, deeds, mortgages, leases, bonds, or other instruments and may
accomplish such execution either under or without the seal of the Company and
either individually or with the Secretary, any Assistant Secretary, or any other
officer or person thereunto authorized by the Board of Directors, according to
the requirements of the form of the instrument. The President shall have such
other powers and duties as usually devolve upon the president of a corporation,
and such further powers and duties as may from time to time be prescribed by the
Board of Directors. The President may delegate any part of the duties of that
office to one or more of the Vice Presidents of the Company.
Section 3. Each of the Vice Presidents shall have such powers and duties as
may be prescribed for such office by the Board of Directors or as may be
prescribed for or delegated to such officer by the President. Each Vice
President may execute for and on behalf of the Company any contracts, deeds,
mortgages, leases, bonds, or other instruments in each case in accordance with
the authority therefor granted by the President or the Board of Directors, which
authority may be general or confined to specific instances. Such execution may
be accomplished either individually or with any other officer or person
thereunto authorized by the President or the Board of Directors, according to
the requirements of the form of the instrument. In the absence or inability of
the President or in case of the President's death, resignation or removal from
office, the powers and duties of the President shall temporarily devolve upon
such one of the Vice Presidents as the Board shall have designated or shall
designate for the purpose and the Vice President so designated shall have and
exercise all the powers and duties of the President during such absence or
disability or until the vacancy in the office of President shall be filled. Each
Vice President may delegate any part of the duties of that office to employees
of the Company under such Vice President's supervision.
Section 4. The Secretary shall attend all meetings of the Board of
Directors, shall keep a true and faithful record thereof in proper books to be
provided for that purpose, and shall have the custody and care of the corporate
seal, records, minutes and stock books of the Company. The Secretary shall also
act as Secretary of all shareholders' meetings, and keep a record thereof,
except to the extent some other person may have been selected to act as
Secretary by such meeting. The Secretary shall keep a suitable record of the
addresses of shareholders, shall have general charge of the stock transfer books
of the Company, and shall, except as may be otherwise required by statute or by
the Bylaws, sign, issue and publish all notices required for meetings of
shareholders and for meetings of the Board of Directors. The Secretary shall
sign all share certificates, bonds and mortgages, and all other documents and
papers to which the Secretary's signature may be necessary or appropriate, shall
affix the seal, and shall have such other powers and duties as are commonly
incidental to the office of Secretary or as may be prescribed for or
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delegated to that office by the Board of Directors, by the President, or, if
authorized by the Board or the President to prescribe such powers and duties, by
a Vice President. The Secretary may delegate any part of the duties of that
office to employees of the Company under the Secretary's supervision.
Section 5. The Treasurer shall have charge of, and be responsible for, the
collection, receipt, custody and disbursement of the funds of the Company, and
the deposit of its funds in the name of the Company in such banks, trust
companies or safety vaults as the Board of Directors may direct which direction
may be general or confined to specific depositories. The Treasurer shall have
custody of such books, receipted vouchers and other papers and records as in the
practical business operations of the Company shall naturally belong in the
office or custody of the Treasurer or as shall be placed in the custody of the
Treasurer by the Board of Directors, by the President, or, if authorized by the
Board or the President, by a Vice President. The Treasurer shall have such other
powers and duties as are commonly incidental to the office of Treasurer or as
may be prescribed for or delegated to that office by the Board of Directors, by
the President, or, if authorized by the Board or the President to prescribe such
powers and duties, by a Vice President. The Treasurer may be required to give a
bond to the Company for the faithful discharge of the Treasurer's duties, in
such form and in such amount and with such sureties as shall be determined by
the Board of Directors. The Treasurer may delegate any part of the Treasurer's
duties to employees of the Company under the Treasurer's supervision.
Section 6. The Controller shall be the principal accounting officer of the
Company. Except as otherwise provided in these Bylaws and except as otherwise
provided by the Board of Directors, the Controller will be responsible for the
direction of the auditing organization of the Company (other than the Internal
Audit function), the establishment and maintenance of accounting procedures, the
interpretation of all financial statements and accounting reports of the Company
and functional supervision over the records of all other departments of the
Company pertaining to revenues, expenses, moneys, securities, properties,
materials and supplies. The Controller shall have such other powers and duties
as are commonly incidental to the office of Controller or as may be prescribed
for or delegated to the Controller by the Board of Directors, by the President,
or, if authorized by the Board or the President to prescribe such powers and
duties, by a Vice President. The Controller may be required to give a bond to
the Company for the faithful discharge of the Controller's duties, in such form
and in such amount and with such sureties as shall be determined by the Board of
Directors. The Controller may delegate any part of the Controller's duties to
employees of the Company under the Controller's supervision.
Section 7. The Assistant Vice Presidents, Assistant Secretaries, Assistant
Treasurers and Assistant Controllers shall, respectively, assist the Vice
Presidents, the Secretary, the Treasurer and the Controller of the Company in
the performance of the respective duties assigned to such principal officers
and, in assisting the respective principal officer, each assistant officer
shall, for such purposes, have the same powers as the respective principal
officer. The powers and duties of any principal officer shall, except as
otherwise ordered by the Board of Directors, temporarily devolve upon the
respective assistant in case of the absence, disability, death, resignation or
removal from office of such principal officer.
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ARTICLE VI
MISCELLANEOUS
Section 1. The funds of the Company shall be deposited to its credit in
such banks or trust companies, as the Board of Directors from time to time shall
approve, which approval may be general or confined to specific instances. Such
funds shall be withdrawn only on checks or drafts of the Company or by direct,
wire or other electronic transfer of funds for the purposes of the Company in
accordance with procedures relating to signatures and authorizations by officers
of the Company which are approved by the Board of Directors from time to time,
which approval may be general or confined to specific instances.
Section 2. No debts shall be contracted except for current expenses unless
authorized by the Board of Directors, and no bills shall be paid by the
Treasurer unless audited and approved by the Controller or by some other person
or committee authorized by the Board of Directors to audit and approve bills for
payment.
Section 3. All distributions to shareholders and all acquisitions by the
Company of its own shares shall be authorized by the Board of Directors.
Section 4. The fiscal year of the Company shall close at the end of
December annually.
Section 5. All or any shares of stock of any corporation owned by the
Company may be voted at any meeting of the shareholders of such corporation by
the President, any Vice President or the Secretary of the Company upon any
question that may be presented at such meeting, and any such officer may, on
behalf of the Company, waive any notice of the calling of such meeting required
by any statute or Bylaw and consent to the holding of any such meeting without
notice. The President, any Vice President or the Secretary of the Company shall
have authority to give to any person a written proxy in the name of the Company
and under its corporate seal to vote at any meeting of the shareholders of any
corporation all or any shares of stock of such corporation owned by the Company
upon any question that may be presented at such meeting, with full power to
waive any notice of the calling of such meeting required by any statute or Bylaw
and to consent to the holding of any such meeting without notice.
Section 6. (a) The Company shall indemnify any person who was or is a
party, or is threatened to be made a party to, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by reason
of the fact that such person is or was a director, officer, employee or agent of
the Company, or who is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding, if
such person acted in good faith and in a manner such person reasonably believed
to be in, or not opposed to, the best interests of the Company and, with respect
to any criminal action or proceeding, if such person had no reasonable cause to
believe such person's conduct
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was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which such person reasonably believed to be in
or not opposed to the best interests of the Company and, with respect to any
criminal action or proceeding, that the person had reasonable cause to believe
that such person's conduct was unlawful.
(b) The Company shall indemnify any person who was or is a party, or is
threatened to be made a party to, any threatened, pending or completed action or
suit by or in the right of the Company to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit, if such person being indemnified acted in
good faith and in a manner such person reasonably believed to be in, or not
opposed to, the best interests of the Company, provided that no indemnification
shall be made with respect to any claim, issue, or matter as to which such
person has been adjudged to have been liable to the Company, unless, and only to
the extent that, the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability, but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court shall deem proper.
(c) To the extent that a director, officer, employee or agent has been
successful, on the merits or otherwise, in the defense of any action, suit or
proceeding referred to in paragraph (a) or (b), or in defense of any claim,
issue or matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection therewith.
(d) Any indemnification under paragraph (a) or (b) (unless ordered by a
court) shall be made by the Company only as authorized in the specific case,
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because such person has met the applicable
standard of conduct set forth in paragraph (a) or (b). Such determination shall
be made (1) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the shareholders of the Company.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Company in advance of the final disposition of
such action, suit or proceeding, upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Company as authorized in this Section 6.
(f) The indemnification and advancement of expenses provided by or granted
under the other subsections of this Section 6 shall be effective with respect to
acts, errors or omissions
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occurring prior to, on or subsequent to the date of adoption hereof and such
indemnification shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
Bylaw, agreement, vote of shareholders or disinterested directors, or otherwise,
both as to action by a director, officer, employee or agent in such person's
official capacity and as to action in another capacity while holding such
office.
(g) The Company may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Company, or
who is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Company would have the power to indemnify
such person against such liability under the provisions of this Section 6.
(h) If the Company has paid indemnity or has advanced expenses to a
director, officer, employee or agent, the Company shall report the
indemnification or advance in writing to the shareholders with or before the
notice of the next shareholders' meeting.
(i) For purposes of this Section 6 references to "the Company" shall
include, in addition to the surviving corporation, any merging corporation
(including any corporation having merged with a merging corporation) absorbed in
a merger which, if its separate existence had continued, would have had the
power and authority to indemnify its directors, officers, and employees or
agents, so that any person who was a director, officer, employee or agent of
such merging corporation, or was serving at the request of such merging
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Section 6 with respect to the surviving
corporation as such person would have with respect to such merging corporation
if its separate existence had continued.
(j) For purposes of this Section 6, references to "other enterprise" shall
include employee benefit plans, and references to "serving at the request of the
Company" shall include any service as a director, officer, employee or agent of
the Company which imposes duties on, or involves services by such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries. A person who acted in good faith and in a manner
such person reasonably believed to be in the best interests of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in this
Section 6.
(k) The indemnification and advancement of expenses provided by or granted
under this Section 6 shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs, executors, and
administrators of that person.
-12-
ARTICLE VII
AMENDMENT OR REPEAL OF BYLAWS
These Bylaws may be added to, amended or repealed by the Board of Directors
at any regular or special meeting of the Board.
-13-
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (Nos. 333-59438, 33-59674 and 33-45506) of Central
Illinois Public Service Company of our report dated February 13, 2003 relating
to the financial statements and financial statement schedule, which appears in
this Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
St. Louis, Missouri
March 24, 2003
Exhibit 99.1
CERTIFICATE
furnished under
Section 906 of the Sarbanes-Oxley Act of 2002.
I, Gary L. Rainwater, chief executive officer of Central Illinois Public
Service Company, hereby certify that to the best of my knowledge, the
accompanying Report of Central Illinois Public Service Company on Form 10-K for
the fiscal year ended December 31, 2002 fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that
information contained in such Report fairly presents, in all material respects,
the financial condition and results of operations of Central Illinois Public
Service Company.
/s/ Gary L. Rainwater
--------------------------------
Gary L. Rainwater
Chief Executive Officer
Date: March , 2003
Exhibit 99.2
CERTIFICATE
furnished under
Section 906 of the Sarbanes-Oxley Act of 2002.
I, Warner L. Baxter, chief financial officer of Central Illinois Public
Service Company, hereby certify that to the best of my knowledge, the
accompanying Report of Central Illinois Public Service Company on Form 10-K for
the fiscal year ended December 31, 2002 fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that
information contained in such Report fairly presents, in all material respects,
the financial condition and results of operations of Central Illinois Public
Service Company.
/s/ Warner L. Baxter
--------------------------------
Warner L. Baxter
Chief Financial Officer
Date: March , 2003