"We are very pleased with the ICC's timely approval of this transaction," said Gary L. Rainwater, chairman, president and chief executive officer of Ameren Corporation. "Despite a number of complex and challenging issues related to this transaction, the ICC approved it within six months of the parties' initial filings, well in advance of the 11 months allowed for transactions of this type under Illinois law."
In a transaction valued at $2.3 billion, Ameren would acquire the stock of IP and Dynegy's 20 percent interest in Electric Energy, Inc. (EEI)\-the owner of a 1,086-megawatt, Joppa, Ill., coal-fired power plant. Ameren now owns 60 percent of EEI.
The transaction would also include a new firm capacity power supply contract for the annual purchase by IP in 2005 and 2006 of 2,800 megawatts of electricity from a subsidiary of Dynegy. That contract is expected to supply approximately 70 percent of IP's electric customer requirements during those two years. IP is currently soliciting bids to supply the remaining 30 percent or 700 megawatts. Because bundled retail electric rates are frozen at current levels in Illinois through 2006, the acquisition will not have an immediate impact on retail electric rates paid by customers of IP during this period. On Sept. 8, Ameren announced that parties participating in its case pending before the ICC had resolved all issues raised in the proceeding before the commission. Agreement terms were consistent, in all material respects, with Ameren's expectations at the time it entered into the proposed acquisition, and today's final ICC order follows---in all material respects---the earlier agreement.
"Based on the efforts of all the parties participating in this case, including the ICC staff, the Citizens Utility Board and the Office of the Attorney General in Illinois, a constructive order was rendered that will benefit all stakeholders," Rainwater added.
Full information related to the order can be obtained from the ICC website at http://www.icc.state.il.us. Key provisions of the ICC's order include the following:
• The final order requires IP to submit reports in 2005 and 2006 on certain milestones regarding IP's progress in achieving an estimated $33 million in annual synergies by 2007, and provides for adjustments in IP's next rate case if IP fails to achieve those milestones.
• After 2006, IP will recover over four years through rates $67 million in reorganization costs related to the integration of IP into Ameren and the restructuring of IP.
• The final order approves a tariff rider to recover the costs of asbestos-related litigation claims, subject to the following terms: beginning in 2007, 90% of costs in excess of the amount included in base rates will be recovered by IP from a $20 million trust fund established by IP and financed with $10 million in contributions from each of Ameren and Dynegy; if costs are less than the amount in base rates, IP will contribute 90% of the difference to the fund; once the trust fund is depleted, 90% of allowed costs in excess of base rates will be recovered through charges assessed to customers under the tariff rider.
• The final order provides IP with the ability to declare and pay $80 million of dividends on its common stock in 2005 and 2006 should IP achieve one investment grade credit rating by Standard and Poor's or Moody's Investor Services, and provided Ameren Corporation is able to maintain at least an investment grade credit rating during that time. These restrictions are lifted should IP eliminate certain high cost debt by the end of 2006, and once IP attains investment grade credit ratings by both Standard & Poor's and Moody's. Ameren has also received approval of the acquisition from the Federal Energy Regulatory Commission and the Federal Communications Commission. In addition, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 expired without a request by the Federal Trade Commission and the Antitrust Division of the Department of Justice for additional information or documents. Ameren's completion of this acquisition also requires approval from the U.S. Securities and Exchange Commission, under the Public Utility Holding Company Act of 1935, and is subject to customary closing conditions. With assets of $14.7 billion, Ameren owns a diverse mix of electric generating plants strategically located in its Midwest market with a capacity of more than 14,600 megawatts. Ameren serves 1.7 million electric customers and 500,000 natural gas customers in a 49,000 square-mile area of Missouri and Illinois.
Forward-Looking Statements
Statements made in this release, 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, the company is 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 release and in past and subsequent filings with the Securities and Exchange Commission, could cause actual results to differ materially from management expectations as suggested by such "forward-looking" statements:
• the closing and timing of Ameren's acquisition of Illinois Power and the impact of any conditions imposed by regulators in connection with their approval thereof;
• difficulties in integrating AmerenCILCO and Illinois Power, if consummated, with Ameren's other businesses; and
• changes in the energy markets, environmental laws or regulations, interest rates or other factors adversely impacting assumptions in connection with the CILCORP and Illinois Power (if consummated) acquisitions.
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