AEE 1st Quarter 2006 Earnings Release
AEE 1st Quarter 2006 Cash Flow, Balance Sheet, Income Statement
AEE 1st Quarter 2006 Consolidated Operating Statistics
Ameren Corporation (NYSE: AEE) today announced second quarter 2006 net income of $123 million, or 60 cents per basic and diluted share, compared to net income of $185 million, or 93 cents per basic and diluted share, in the second quarter of 2005. Net income for the first six months of 2006 was $193 million, or 94 cents per share, compared to $306 million, or $1.55 per share, in the first half of 2005.
"Several factors contributed to Ameren's decreased earnings in the second quarter as compared to last year," said Gary L. Rainwater, chairman, chief executive officer and president of Ameren Corporation. "These included higher fuel and related transportation costs, decreased power plant availability, including an unplanned outage at our Callaway nuclear plant, costs associated with the Taum Sauk incident and milder weather."
Revenues in the second quarter of 2006 of $1.6 billion were comparable to the prior-year period. Cooling degree days in the second quarter of 2006 were 20 percent above normal, but approximately 8 percent below the second quarter of 2005, according to the National Weather Service. As a result, weather- sensitive residential electric sales in the second quarter of 2006 fell almost 4 percent, and commercial electric sales decreased 1 percent below the prior- year period. The effect of weather is estimated to have reduced second quarter 2006 earnings by 4 cents per share versus the same period in 2005.
Industrial electric sales in the second quarter of 2006 increased 9 percent as a result of sales to Noranda Aluminum, Inc, which became a customer on June 1, 2005. Interchange power sales decreased 7 percent in the second quarter of 2006 versus the same period a year ago, due primarily to decreased power plant availability and higher industrial electric sales.
Fuel and purchased power costs increased $39 million in the second quarter of 2006 over the same period in 2005, primarily because of significantly higher coal and related transportation costs, as well as higher purchased power costs as a result of plant outages and the expiration of a cost-based affiliate power supply contract at the end of 2005. In addition, other operations and maintenance expenses increased $19 million in the second quarter of 2006 as compared to the second quarter of 2005. Other operations and maintenance expenses increased principally because of $10 million of incremental costs associated with the December 2005 breach of the upper reservoir at AmerenUE's Taum Sauk pumped-storage hydroelectric facility and higher legal fees.
"On July 19, and again on July 21, our service territory was hit by severe storms, which included several tornados," added Rainwater. "These storms were the most damaging in the company's history and resulted in the loss of power to approximately 700,000 of our customers. Through the dedication of a force of 5,200, including our employees, contractors and utility workers from 13 states, we restored service to all of our customers within nine days. While the full financial impact of these storms has not yet been determined, we have incurred unanticipated costs and the loss of electric margins as a result of these devastating storms."
"The first half of 2006 was indeed challenging as several unexpected events transpired that negatively impacted earnings, including continuing costs from the Taum Sauk incident, milder winter weather, severe spring storms, unscheduled plant outages and weaker-than-expected power prices," added Rainwater. "As we look ahead to the second half of 2006, we expect, among other things, to realize the benefits from the lack of a Callaway refueling outage, fewer outages and the lack of coal conservation measures at our coal- fueled power plants, and lower Midwest Independent Transmission System Operator, Inc. charges as compared to the second half of 2005. Looking forward to 2007, we are hopeful many of the events that negatively impacted earnings in 2006 will be behind us. We will also be working hard to get appropriate recovery of our higher operating costs and infrastructure investments in our pending rate cases in Missouri and Illinois. And finally, we will remain focused on optimizing the value of our low-cost unregulated generation in Illinois as below-market power supply agreements will expire at the end of 2006."
Ameren also announced today that it is reducing its 2006 non-GAAP earnings guidance. The company now expects non-GAAP 2006 earnings to range between $2.75 and $3.00 per share, which excludes any impact of the July 2006 storms. Earnings per share guidance was reduced primarily because of reduced power plant availability in the second quarter of 2006, the incremental costs of the Taum Sauk incident, warmer-than-normal winter weather and lower-than-expected power prices for interchange sales. Ameren's guidance assumes normal weather for the rest of 2006, excludes any impact of the July 2006 storms, and is subject to, among other things, plant operations, energy market and economic conditions, unusual or otherwise unexpected gains or losses and other risks and uncertainties outlined in Ameren's Forward-looking Statements.
Ameren will conduct a conference call for financial analysts at 9:00 a.m. (Central Time) on Thursday, Aug. 3, to discuss second quarter 2006 earnings and other matters related to the company. Investors, the news media and the public may listen to a live Internet broadcast of the call at www.ameren.com by clicking on "Q2 2006 Ameren Corporation Earnings Conference Call," then the appropriate audio link. A slide presentation will also be available on Ameren's Web site that reconciles second quarter and first half 2006 earnings per share to second quarter and first half 2005 earnings per share and the 2006 earnings per share guidance to 2005 earnings per share on a comparable share basis. This presentation will be posted in the "Investors" section of the Web site under "Presentations." The analyst call will also be available for replay on the Internet for one year. Telephone playback of the conference call will also be available beginning at 11:00 a.m. (Central Time), from Aug. 3 through Aug. 10, by dialing, U.S. (800) 405-2236; international (303) 590-3000 and entering the number: 11065832#.
With assets of more than $18 billion, Ameren serves approximately 2.4 million electric customers and almost one million natural gas customers in a 64,000 square mile area of Missouri and Illinois. Ameren owns a diverse mix of electric generating plants strategically located in its Midwest market with a generating capacity of more than 16,200 megawatts.
Regulation G Statement
Ameren has presented certain information in this presentation on a diluted cents per share basis. These diluted per share amounts reflect certain factors that directly impact Ameren's total earnings per share. Ameren believes this information is useful because it enables readers to better understand the impact of these factors on Ameren's earnings per share. 2006 non-GAAP earnings per share guidance excludes any impact of the July 2006 storms, which has not yet been determined.
Statements in this release not based on historical facts are considered "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" provi?sions 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 release and in our filings with the Securities and Exchange Commission, could cause actual results to differ materially from management expectations as suggested by such forward-looking statements:
• regulatory actions, including changes in regulatory policies and ratemaking determinations;
• changes in laws and other governmental actions, including monetary and fiscal policies;
• 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, and the implementation of deregulation, such as when the current electric rate freeze and current power supply contracts expire in Illinois at the end of 2006;
• the effects of participation in the Midwest Independent Transmission System;
• the availability of fuel such as coal, natural gas and enriched uranium used to produce electricity; the availability of purchased power and natural gas for distribution; and the level and volatility of future market prices for such commodities, including the ability to recover the costs for such commodities;
• the effectiveness of our risk management strategies and the use of financial and derivative instruments;
• prices for power in the Midwest;
• business and economic conditions, including their impact on interest rates;
• disruptions of the capital markets or other events that make access to necessary capital more difficult or costly;
• the impact of the adoption of new accounting standards and the application of appropriate technical accounting rules and guidance;
• actions of credit rating agencies and the effects of such actions;
• weather conditions and other natural phenomena;
• the impact of system outages caused by severe weather conditions or other events;
• generation plant construction, installation and performance, including costs associated with the Taum Sauk pumped-storage hydroelectric plant incident and its future operation;
• operation of the Callaway nuclear power facility, including planned and unplanned outages, and decommissioning costs;
• the effects of strategic initiatives, including acquisitions and divestitures;
• the impact of current environmental regulations on utilities and power generating companies and the expectation that more stringent requirements will be introduced over time, which could have a negative financial effect;
• labor disputes and future wage and employee benefits costs, including changes in returns on benefit plan assets;
• changes in the energy markets, environmental laws or regulations, interest rates, or other factors that could adversely affect assumptions in connection with the Illinois Power Company acquisition;
• the impact of conditions imposed by regulators in connection with their approval of Ameren's acquisition of Illinois Power Company;
• the inability of our counterparties to meet their obligations with respect to contracts and financial instruments;
• the cost and availability of transmission capacity for the energy generated by Ameren generating facilities or required to satisfy energy sales;
• legal and administrative proceedings; and
• acts of sabotage, war, terrorism or intentionally disruptive acts.
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 to reflect new information, future events, or otherwise.
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