阿莫林 (AEE) 2006 Q3 法說會逐字稿

Good morning ladies and gentlemen, and welcome to the Ameren Corporation Third Quarter 2006 earnings Conference Call. [OPERATOR INSTRUCTIONS]

I would now like to turn the conference over to Bruce Steinke, Manager of Investor Relations. Please go ahead, sir.

Thank you, Eric, and good morning, everyone. I am Bruce Steinke, Manager of Investor Relations here at Ameren Corporation. Here with me today is our Chairman, President and Chief Executive Officer Gary Rainwater, our Executive Vice President and CFO, Warner Baxter, our Vice President and Controller, Marty Lyons, our Vice President and Treasurer Jerre Birdsong and other members of Ameren's Senior Management Team.

Before we begin, let me cover a few administrative details. This hour long call is available by telephone for one week to anyone who wishes to hear it by dialing a playback number. The announcement you received in our news release carry instructions on replaying the call by telephone. This call is also being broadcast live on the internet and the Webcast will be available for one year on our website at www.ameren.com.

This call contains time sensitive data that is accurate only as of the date of today's live broadcast. Redistribution of this broadcast is prohibited. I also need to let you know that comments made on this conference call may contain statements that are commonly referred to as forward-looking statements. Such statements include those about future expectations, beliefs, plans, strategies, objectives and financial performance. We caution you that various factors could cause actual results to differ materially from those anticipated in the forward-looking statements.

For additional information concerning these factors, we ask you to read the forward-looking statement section in the news release we issued today and the forward-looking statements and risk factor sections in our filings with the SEC. To assist in our call this morning, we have made a slide presentation available on our website that reconciles our earnings per share for the third quarter and first nine months of 2006 to our earnings per share for the third quarter and first nine months of 2005 on a comparable share basis.

In addition, this presentation includes a slide that compares our 2006 non-GAAP earnings per share guidance to full year 2005 earnings per share, again on a comparable share basis.

To access this presentation you may look in the Investor Section of our website under presentations or follow the link for the Webcast. Gary will begin this call with an overview of our third quarter 2006 results and some key operating, regulatory and legislative matters. Warner will then follow with a further update on regulatory and legislative matters, a more detailed review of our third quarter results and some insight for 2007. We will then open it up for questions.

Here is Gary.

Thanks, Bruce. Good morning, and thank you for joining us.

This morning we reported third quarter 2006 earnings of $1.42 per share which compare to last year's third quarter earnings of $1.37 per share. For the first nine months of 2006 Ameren reported earnings of $2.37 per share compared to earnings of $2.94 per share in the prior-year period.

Net income in 2006 reflects costs and lost electric margins associated with severe 2006 storms totaling $31 million or $0.10 per share for the third quarter and $40 million or $0.13 per share for the first nine months of 2006. The July 2006 storms resulted in the loss of power to approximately 950,000 of our electric customers. Excluding these amounts, non-GAAP earnings per share was $1.52 per share in the third quarter of 2006 and $2.50 per share for the first nine months of 2006.

The most damaging storms in the Company's history, costs of the Taum Sauk incident and milder summer weather provided a significant earnings challenges in the third quarter of 2006. Nonetheless, electric margins still rose during the quarter due to solid organic growth, industrial customers switching back to the Illinois utilities, improved plant operations, higher interchange margins, and lower costs associated with MISO Day Two energy market. These factors coupled with other cost control initiatives more than offset the impact of these earnings challenges and contributed to solid third quarter financial results.

From an operational standpoint, our power plants performed very well. Our Callaway nuclear plant was available for the entire quarter and is expected to remain available for the rest of the year with no scheduled refueling and maintenance outage in 2006. In addition, our coal fired power plant fleet performed well as its availability was 92% in the third quarter of 2006 and its capacity factors increased 2% from the 2005 third quarter to almost 84%.

From a coal delivery perspective, our deliveries are still somewhat below our expectations; however we continue to maintain adequate coal inventory levels and do not expect to have to put in place any coal conservation measures this year.

Warner will cover the drivers of our 2006 earnings in more detail in a few minutes, so I'll turn now to a discussion of some key regulatory and legislative matters. In October 2006, the Federal Energy Regulatory Commission approved a stipulation and consent agreement between the Ameren UE and the FERC Office of Enforcement that resolved all potential federal liability associated with the December 2005 failure of Ameren UE's Taum Sauk pumped-storage hydroelectric plant.

Ameren UE agreed to pay a fine of $10 million and to fund another $5 million in project enhancements at or near the Taum Sauk facility. We continue to work with State authorities on liability matters related to this incident and to determine whether and how to rebuild the facility. Should the Taum Sauk facility be rebuilt, we expect the plant will remain out of service through at least all of 2008 if not longer.

As most of you know, things have been quite active in Illinois as we approach the end of a decade-long electric rate freeze. Our Illinois utilities, Ameren CIPS, Ameren Cilco, and Ameren IP own no generation and their supply contracts expire at the end of this year. To provide power for Illinois utility customers in 2007 and beyond,the Illinois Commerce Commission approved procurement auction was conducted in September. Over 20 suppliers participated. The auction was subsequently declared successful by the independent auction manager and the Illinois Commerce Commission and post-2006 supply contracts were signed.

For residential and small commercial customers, those supply contracts resulted in market prices for power of approximately $65 per megawatt hour which is significantly above supply prices currently reflected in existing customer rates. For our large commercial and industrial customers, the auction resulted in market prices of approximately $85 per megawatt hour. However we expect that nearly all of the large commercial and industrial customers will choose to ultimately procure their power needs from other sources.

Our delivery services cases also continue to move forward. In early October, the administrative law judges in our delivery services cases recommended an aggregate $147 million increase in delivery service rates. This recommendation compares to our requested increase of over $200 million, an ICC staff recommended increase of approximately $120 million and an estimated $110 million recommended increase by the Illinois Attorney General. The ICC will rule on the delivery service cases by the end of November.

As a result of our increased power supply costs and expected new delivery service rates, we estimate the average combined electric rate increase for our residential customers would be about $1 per day, or an increase of 40 to 55% beginning in January 2007. At these rate levels our residential customers' rates will still be below national average residential electric rates. The magnitude of these increases after 15 to 25 years with no increases coupled with the November 7th elections, have prompted calls from some key lawmakers including the Speaker of the House of representatives, and the Illinois governor, for a special session of the legislature to pass an extension of the rate freeze.

While time is growing shorter for a special session to be called, it's important to note that even without a special session, we expect the rate freeze issue, as well as other legislative alternatives, will be addressed in the veto session scheduled for several days during the last two weeks of November. In early October, an Illinois House Electric Utility Oversight Committee meeting was held and a rate freeze bill was voted out of committee. At that hearing, we clearly outlined the consequences of an extension of the rate freeze.

Many of these points are worth pointing out again. If a rate freeze were to occur, our Ameren Illinois utilities estimate they would spend approximately $1 billion annually or $2.5 million per day more for power than they could charge their customers. To put this in perspective, our Ameren Illinois utilities earned only $165 million for all of last year and are trending below that number this year.

As has clearly been demonstrated by recent actions and statements by the credit rating agencies, if rates are frozen beyond 2006, the credit ratings of the Ameren Illinois Utilities will be immediately slashed to deep junk status. These credit ratings will immediately trigger collateral requirements and the like and with rates so far below their costs, our Illinois Utilities would quickly run out of cash and available credit and be unable to borrow. We believe this would lead to the Ameren Illinois Utilities being financially insolvent by February 2007 or sooner.

Consequently, Ameren CIPS, Ameren Cilco, and Ameren IP would no longer be able to buy power and natural gas. In order to avoid power and gas supply disruptions, we believe it is likely the State of Illinois would have to step in and pay for these essential commodities just like in California, ultimately increasing the electric and gas costs for our Illinois customers. In order to keep the lights on and the gas flowing as long as possible, we would immediately lay off approximately 25% of our Illinois Utility workforce, eliminate nearly all our outside contractors, significantly reduce, if not eliminate key reliability projects including tree trimming, and discontinue all charitable contributions to the communities we serve, among other actions.

I believe it's also important to point out that these consequences could also occur with legislation that falls short of a rate freeze but still impairs our utilities ability to fully recover costs in a timely manner and thereby, lowers credit ratings below investment grade levels. With all these critical issues at stake, I simply find it difficult to believe that the Illinois legislature and governor would repeat the mistakes made in California just a few years ago. While I'm hopeful that history does not repeat itself in Illinois, we take these threats very seriously.

We strongly believe that the enactment of a rate freeze or other legislative actions that impair our ability to fully recover our costs on a timely basis are unlawful, and we will vigorously defend our stakeholders interests. In addition, we have engaged bankruptcy counsel and have already taken meaningful steps to limit the impact of an Illinois rate freeze or similar adverse legislation on other aspects of our business. Warner will explain this in more detail a bit later.

While we are taking these actions to protect our legal and financial interests, rest assured that we remain steadfastly committed to working with key stakeholders to develop a constructive solution to this matter that will mitigate the impact of rate increases on our residential and some of our small to medium sized commercial customers as well as provide for a full and timely recovery of our costs and maintain investment grade credit ratings.

In October, our Ameren Illinois Utilities filed a plan with the ICC which offers a constructive solution to this issue. Specifically, this plan would allow residential customers to phase in the expected electric rate increases. For the residential customers who choose to participate in this deferred billing plan, their rates would increase 15% in 2007, another 15% in 2008, and up to 15% in 2009. Deferred billings not collected by the end of 2009 would be collected with a modest interest charge over the following three years. This plan essentially limits the 2007 increase on an average residential customer's bill to $0.30 per day.

In addition, our Ameren Illinois Utilities have also proposed an additional contribution of $5 million to their Dollar More and Warm Neighbors bill paying assistance and energy conservation programs. We've also offered a securitization based rate increase phase in plan as another potential alternative. Securitization legislation was introduced in the spring session but has not been passed. For well over a year now we have clearly expressed our willingness to work with key Illinois stakeholders to develop a constructive solution to this important energy policy issue.

Now with so much at stake, it is critical that all involved in the process thoughtfully consider those legislative and regulatory options that are truly in the best long-term interests of all stakeholders, including our customers, communities, and the State of Illinois. The consequences of short sided decisions on such a critical energy policy issue are far too great. We are convinced that a constructive rate increase phase-in plan that mitigates the initial rate increase to residential and some of our small to medium sized commercial customers, as well as permits full and timely recovery of our costs and maintains investment grade credit ratings at our Illinois Utilities is clearly the best possible approach for all stakeholders. We look forward to continuing the dialogue on this important issue over the next several weeks.

At this point, I'll now turn the discussion over to Warner who will further discuss regulatory and legislative matters, our third quarter earnings, and our earnings outlook.

Thanks, Gary.

Continuing with our discussion of the Illinois issues, the extension of an electric rate freeze or other legislation in Illinois that impairs our ability to fully recover costs in a timely manner thereby lowers credit ratings below investment grade levels to clearly have a material financial impact on Ameren as a whole. In addition to the significant liquidity issues that Gary described earlier, we could also immediately incur charges of over $1 billion due to the impairment of goodwill and regulatory assets in our Illinois operations.

Over the past year, we have taken actions to limit the financial impact that insolvency at the Ameren Illinois Utilities would have on the rest of the Ameren companies. Among other things, we established a new separate secured credit facility for the Ameren Illinois Utilities. We also removed cross-to-fault provisions from the Ameren Corporation credit facility which is also jointly utilized by Ameren UE and Ameren Energy Generating Company.

Some proponents of the rate freeze incorrectly contend that Ameren could easily absorb the revenue shortfall at our Illinois Utilities. Putting aside the legal issues associated with this view which are significant, it is important to note that only 27% of Ameren's 2005 earnings were derived from the Illinois Utilities. Nearly 60% of Ameren's 2005 earnings came from our Missouri regulated utility operations. Just as our Illinois legislators and regulators would not permit our Illinois customers to bail out on Missouri regulated utility operations, I am certain that our Missouri regulators and legislators will not permit our Missouri customers to bail out our Illinois regulated operation.

As Gary stated earlier, the bottom line is that we will take whatever actions are necessary to protect our legal and financial interests in this matter if the rate freeze is extended or other legislation is passed that would have adverse consequences.

Moving on to our Missouri operations, we believe we are already under-recovering our costs in our Missouri electric and gas regulated operations, and in July, Ameren UE filed for it's first electric rate increase in almost 20 years. The Company's electric filing includes a proposed annual increase in electric rates of $361 million and our gas filing requests an increase of of $11 million annually.

There's not much new to report in these matters since our last call; however the calendar has been established for these cases. Missouri Public Service Commission staffs and other interveners testimony on revenue requirements is due December 15th. Rebuttal testimony is due in late January and early February with hearings scheduled for March. Decisions are expected by the Missouri Public Service Commission by early June.

As part of our Missouri electric rate case, we have also requested a fuel and purchased power cost recovery mechanism. In September, the Missouri Public Service Commission approved rules under the provisions of the 2005 Missouri State law that provides for such recovery mechanism and we expect these rules to be effective by year-end.

I would now like to refer you to our website as I provide a more detailed discussion of earnings for the third quarter and first nine months of 2006. As Bruce mentioned earlier, to assist in our call this morning, we have made a slide presentation available on our website that reconciles our earnings per share for the third quarter and first nine months of 2006 to our earnings per share for the third quarter and first nine months of 2005 on a comparable share basis. In addition, this presentation includes a slide that compares our 2006 non-GAAP earnings per share guidance to full year 2005 earnings per share on a comparable share basis.

For the third quarter of 2006, we reported net income of $293 million or $1.42 per share compared to net income for the third quarter of 2005 of $280 million or $1.37 per share. For the first nine months of 2006, we reported net income of $486 million or $2.37 per share compared to net income in the first nine months of 2005 of $586 million or $2.94 per share.

As Gary mentioned earlier, the margin and cost impact of severe storms in 2006 reduced net income by $31 million or $0.10 per share in the third quarter to $40 million or $0.13 per share in the first nine months of 2006. Excluding the impact of these storms, net income would have been $1.52 per share for the third quarter and $2.50 per share for the first nine months of 2006.

Native load growth, including industrial customers switching back to the Illinois utilities, improved power plant operations, the lack of coal conservation measures and higher interchange margins more than offset higher coal and related transportation costs and purchased power expenses. These factors increased electric margins $0.18 per share during the third quarter of 2006 compared to the year-ago period.

Native load growth rose due to solid growth in our service territory, as well as because of several industrial customers in Illinois switching back to the Illinois tariff rates as a result of the expiration of power contracts with suppliers. These, and other factors, contributed $0.14 per share to the higher electric margins during the quarter compared to the same period last year.

In addition, interchange margins rose $0.11 per share during the quarter from 80% owned Electric Energy, Inc, due to the expiration of cost based power supply contracts at the end of 2005, improved plant operations, the expiration of low margin wholesale contracts and milder weather. Lower energy prices in the third quarter of 2006 offset, in part, these positive factors, as on-peak market prices for power declined approximately 40% and off-peak prices declined approximately 20%. Energy prices were higher in 2005 as a result of the significant impact of hurricanes and rail disruptions.

Higher fuel and purchased power costs decreased electric margins by approximately $0.07 per share during the quarter due to higher coal and related transportation costs and to the expiration of Electric Energy, Inc space power supply contracts with our regulated utilities.

Cooling degree days in the third quarter 2006 were 13% above normal but 10% below the prior year period according to the National Weather Service. As a result, weather sensitive, residential electric sales in the third quarter of 2006 were 7% below the same period in 2005. Combined commercial and industrial electric sales in the third quarter of 2006 were flat compared to the prior year period. Lower electric sales resulting from the milder weather are estimated to have reduced third quarter 2006 earnings by $0.03 per share compared to the prior year period. However, compared to normal, weather was favorable during the quarter by $0.04 per share.

Incremental costs of the December 2005 Taum Sauk plant incident negatively impacted third quarter 2006 earnings by $0.07 per share. This amount includes the settlement with the FERC for all potential federal liability associated with the December 2005 failure Ameren UE's Taum Sauk pumped-storage hydroelectric plant and lower electric margins due to the plant being out of service.

As expected, the cost of operating in the MISO Day Two energy market were lower during the third quarter as compared to the year ago period which benefited earnings by $0.02 per share. In the third quarter of 2006, pretax earnings included $20 million from the sale of excess emission allowances from our 80% owned Electric Energy, Inc subsidiary; however the year-over-year impact of emission allowance sales was relatively flat.

You may recall that we began a refueling and maintenance outage at our Callaway nuclear plant in mid-September, 2005. Since there was no outage this year, earnings benefited by $0.03 per share. Uncollectible accounts continue to trend lower than expected. Reduced charges for bad debts benefited earnings by $0.03 per share during the quarter. Higher depreciation and amortization expenses reduced earnings by $0.02 per share in the third quarter of 2006 compared to the year ago period primarily because of capital additions.

Net dilution and financing costs reduced earnings by $0.05 per share in the third quarter of 2006 over the same period a year ago due to increased borrowings. You may recall that in the third quarter of 2005, we took a one-time write-off for a leveraged lease investment associated with Delta Airlines. Since there is no similar item this year that benefited 2006 third quarter earnings relative to last year, by $0.04 per share.

Other items, including lower labor costs better to benefit earnings by $0.03 per share during the third quarter. This morning, we also announced that we have reaffirmed that we expect 2006 non-GAAP earnings to range between $2.75 and $3 per share. Our current guidance excludes the estimated $0.13 to $0.15 per share impact of the severe 2006 storms.

Looking forward to the fourth quarter, it is important to note that our Callaway nuclear plant had an extended schedule refueling and maintenance outage last year in the fourth quarter that will not take place this year. The lack of a refueling outage is expected to benefit 2006 fourth quarter earnings by $0.14 per share compared to last year. In the fourth quarter of 2005, we were also required to conserve coal due to rail transportation disruptions. These actions negatively impacted electric margins and we do not expect this to recur in the fourth quarter of 2006.

We also expect to see an improvement in year-over-year MISO Day Two costs in the fourth quarter. On the other hand, we had gains from leveraged lease sales in the fourth quarter of 2005 totaling $0.11 per share. At this time, we continue to work on the divestiture of our remaining leverage leases. Ameren's guidance assumes normal weather for the rest of 2006 excludes the $0.13 to $0.15 per share impact of the severe 2006 storms and is subject to, among other things, plant operations, energy market and economic conditions, regulatory and legislative decisions, unusual or otherwise unexpected gains or losses, and other risks and uncertainties outlined in Ameren's forward-looking statements.

Looking forward to 2007, and consistent with our past practice, our current plan is to provide our earnings guidance to you in early 2007 after we have some more clarity on some of the key variables that we expect to impact earnings as well as complete our planning for next year. While we will provide more specific guidance to you early next year, we realize that there are a lot of changes taking place in our business in 2007. As a result, we thought it might be helpful to provide you with some key financial and operational considerations at this time. Of course, one of the key considerations is new contract prices for much of our non-rate regulated generation business.

As we have discussed with you throughout the year, we have and will continue to actively sell forward and hedge our expected available 2007 generation. We are targeting to have 85 to 90% our estimated 2007 economic generation committed by the end of this year while also making meaningful progress hedging our forecasted economic generation in 2008 and 2009. As you know, our subsidiary, Ameren Energy Marketing, was awarded contracts in the September 2006 Illinois Power procurement auction. You may recall that under the auction rules, we were limited supplying no more than 35% of our Illinois utilities combined load.

As Gary discussed earlier with expected switching from commercial and industrial customers following the auction, the actual percentage we will supply will likely be lower than what was originally awarded in the auction. Ameren Energy Marketing's level of participation in the auction will be disclosed by the independent auction manager in early December. Non-rate regulated economic generation for 2007 and beyond that sold through the auction, will be sold under pre-existing and new contracts with retail, wholesale, and other customers, as well as sold through block sales and in the hourly market.

Of course, prices on these contracts will vary from the auction price based on the contract type, the time period when the contracts were entered into, and load shape of customers served under those contracts, among other things. We're also hopeful that we will realize some of the benefits of much needed rate increases in our regulated operations; however, we expect these increases to be mitigated in part by rising cost pressures throughout our business.

In our regulated Missouri and Illinois operations, our rates will be set based on historical costs. In Missouri, we used a test year-ending June 30, 2006. We expect that updates for significant known and measurable items, including fuel costs and capital additions, will be allowed. In Illinois, the test year utilized in our distribution Company rate cases December 31, 2004 with updates for significant known and measurable items including capital additions and tree trimming.

To the extent our future costs and our regulated businesses rise above the levels established in our rates, they will negatively affect future earnings and returns until another rate case is filed and completed. This is commonly referred to as regulatory lag and we expect to experience this in 2007. Of course any cost pressures experienced in our non-rate regulated generation business will directly impact our earnings until market conditions reflect the higher costs of operations.

In particular, we expect to incur higher fuel and purchased power costs in our regulated and unregulated operations. Specifically, we expect coal and related transportation costs to rise approximately 20% next year over 2006 levels. A higher percentage of this increase will be seen in our Missouri regulated operations in 2007. While we are hopeful that a portion of the increases incurring in our regulated operations will be mitigated with constructive outcome in our Missouri electric rate case, we'll still experiences increases in fuel and purchased power costs in the first half of 2007 due to regulatory lag.

The Missouri regulated operations will also experience higher purchased power expenses and increased maintenance costs due to a scheduled refueling and maintenance outage at the Callaway plant in the spring. Other operating expenses, as well as capital expenditures, are expected to rise as certain aspects of our business are seeing meaningfully higher contract labor and material costs in order to maintain and improve system reliability.

In Illinois, we will also experience higher year-over-year purchased power expenses as the amortization of certain favorable purchase accounting adjustments associated with the Illinois Power acquisition, is completed. We also expect to incur higher bad debt expenses due to rising electric rates and higher insurance expenses. In 2007 we also plan to have reduced levels of emission allowance sales and we will begin to experience meaningfully higher environmental compliance expenditures and related costs. And finally we expect to incur higher depreciation related financing costs due largely to capital additions and regulatory lag.

This completes our prepared comments.

We'll be now happy to take your questions.

[OPERATOR INSTRUCTIONS]

Our first question comes from Daniele Seitz with Dahlman Rose.

Thank you. I just was wondering if obviously coal prices seem to have gone down recently. When do you anticipate this will trickle into your system and sort of alleviate some of the coal increases, coal cost increases that you're mentioning now?

Hi, Daniele, this is Warner.

Hi.

I wanted to confirm the question. So you're asking about the --

Recent coal --

-- [Indiscernible] and how mitigate the and how that ultimately may impact --

Yes.

Our ultimate coal cost? Gary you want to talk just briefly about the coal situation?

Daniele, we probably have talked with you before about how we purchase coal.

Okay.

We hedge the prices by generally buying about 20% of our requirements each year so going into next year, we're almost 100% hedged but a lot of that coal has been purchased five years ago and two years out 80% and so on, so the recent decline in prices has minimal impact on our future estimates that we've given you before. I think the guidance that we have provided is that this year , prices are up 15 -- 10 to 15%. Next year, we see about a 20% increase. That 20% is still a good number.

Okay.

Daniele, this is Warner. Keep in mind, the other piece of that relates to transportation.

Right.

Of course we've seen those costs going up and as we lock in those contracts and we hedge our transportation costs in a similar fashion in terms of the hedging percentages --

Right , so, it has an diminished impact in the near term, I guess?

That's correct. We're going to continue to see pressure in terms of price increases.

Just as a reminder, maybe, when do you sense that first the completion of your environmental expenditures and the potential benefits from emission credits, when do you sense that this could trickle in as well?

Daniel, with regard to our overall environment expenditures, we obviously disclosed that we expect those expenditures to at least go through 2016 and we're starting to put some of those scrubbers in systematically throughout our system.

In general, when you look at our system, we are generally short emission allowance credits on our non-rate regulated businesses whereas on our regulated business, we have more length in terms of our overall emission credits, and so over the next couple years as we start putting some of those scrubbers, we may see some of the benefits of freeing up some of those excess emission allowances and we reflect those in our plans already.

Okay, thank you.

Our next question comes from David Frank with [indiscernible] Capital Management. Please go ahead.

Yes, hi, good morning.

Good morning, David.

Warner, is there any color or can you expand a little bit on the break down between the fuel increases expected for next year, the coal increases in Missouri and in Illinois? You're saying 20%. Can you give us a little more of a break down between two regions?

Yes. In terms of how you might look at that in terms of the percentage increase where it's taking place, David, let me get back to you on that. I think in general as we've said, it's more on the Missouri regulated side and I think it's close to the 60 to 65% of that increase is being attributable to there and that's principally being driven by some new transportation contracts that had to be entered into among other things, years ago as those contracts expired.

Okay and I guess maybe looking at it on the unit cost basis, instead of, you're saying that in aggregate, fuel or expense will be up around 20%, but will coal costs be up 20% in both Illinois and Missouri or they will be up 30% to 20% in Missouri and 10% in Illinois? Is there anyway you could --

I think in terms of that I think probably the best thing to do for us is as we provide detailed guidance for 2007, we'll be able to give you a little more color on that, but you have to keep in mind that with regard to our overall coal, we do pool those coal costs and then those are utilized throughout both our regulated and non-regulated generation system. So that may mitigate a little bit of the issue that you're talking about. But in terms of the specifics, when we rollout our 2007 earnings guidance after the first of the year we'll be able to give you more clarity on that.

You will continue to pool? The -- will the regulators have any issue with that or like why -- I mean, obviously you don't want a -- the regulators don't want you to stick them with all of the highest cost coal in Missouri, but is there an opportunity here somehow or a way to end maybe some bleeding potentially?

You know, I think that we've been pulling this, it's not a new concept and certainly something that our regulators are very well aware of and generally believe that we believe that's the best practice. It overall reduces the overall cost exposures for all of our generating plants, so we don't have any immediate plans to change our operations in that regard.

Okay. And maybe a question for Gary on the governor's race. I was reading recently that the third party candidate is pretty close to -- there's a recent poll that showed he was neck and neck with the governor. Do you have any insights or would you make any bets or handicap this race in Illinois? And what does it mean for the situation for the utilities in Illinois if there is an election of a new governor?

Well, David, I haven't seen the poll that you're talking about. The last polling results that I saw showed the governor ahead by about 10% which generally takes a little pressure off to do a special session, although we're so short on time now, we don't expect to see a special session of the legislature. But my expectation is Governor Blagojevich is reelected.

Okay. And if for some reason he wasn't I guess this issue would be resolved prior to, in all likelihood, prior to a new governor coming in anyway?

Well, by the end of the year, we certainly expect it to be resolved.

Okay, great. Thank you.

Our next question comes from Scott Engstrom of Satellite Asset Management. Please go ahead.

Good morning, guys.

Good morning.

A lot of calls this morning so if I missed this I apologize. Accounting question on the July storms. $0.10 in the quarter but $0.13 for the nine months. Just could you explain how the $0.03 slips back into a prior quarter?

Sure. Scott, what you may not recall and we didn't talk extensively about it but we had some meaningful storms in the first quarter and tornadoes that went through that hurt some of our system.

Okay, so the $0.13 is both the July plus earlier storms?

That's correct.

Okay. On the the Taum Sauk $0.07 charge, you kind of, you excluded the storm costs but not the Taum Sauk charge. There's nothing about it that's recurring, right? That is truly a one-time kind of item, correct?

With regard to Taum Sauk, there are probably a couple things to think about. When we went out earlier in the year with our guidance, we have reflected the Taum Sauk cost as part of that guidance, and so we wanted to be consistent in terms of how we presented the Taum Sauk versus the storm whereas the storm came later and now we are setting that aside separately.

Secondly, there is an ongoing cost associated with Taum Sauk and that's related to the fact that the plant is not running and so this year we are incurring higher fuel and purchase power costs and lost margins as a result of the Taum Sauk plant being out of service. That will continue into next year although we will have some insurance coverage that will help mitigate that going forward in the next year.

And of course, finally, we did incur some fines as well as we set aside some money for some projects related to the Taum Sauk incident and so those two are laid out in those numbers.

Okay, so the $0.15 to $0.20 cent Taum Sauk adjustment going from '05 to '06 guidance includes some estimate for what that $0.07 charge was going to be when you initially made that $0.15 to $0.20?

Yes. If you look back and you think about the Taum Sauk issue, we had estimated earlier in the year about $0.07 to $0.12 that Taum Sauk would affect our operations and by and large most of that was related to margin and then since that time we've obviously incurred some incremental costs associated with some of these fines and projects and they have been reflected in our guidance.

Great. I also appreciate the, I think it's new disclosure on the geographical stuff. I was still going to ask if you had numbers for the quarter, net income by [Inaudible].

I do, indeed. We always have this schedule out here ready for you, so here we go. For Union Electric, it was for the quarter 165 million, CIPS it was 28 million, for Progenco it's 19 million, Cil Corp, 13 million and for IP it was 42 million and other Ameren activities non-regulated were 26 million.

And you said Cil Corp, Not Cilco, right?

Well, Cilco is a component of that.

Yes.

It's other activities in Cil Corp.

Thank you very much.

You know, I want to point out that one of the things you will see when we file our 10-Q at some point next week, we are going to be breaking down our disclosures on those segments that we disclosed in our financial -- in our press release today for a variety of reasons we've done that because that's really how our operations are going to be sorted post 2006 and importantly, we think that it will help investors understand our business more clearly and from provide even greater transparency into our business going forward.

Good. Look forward to it.

Sure.

[OPERATOR INSTRUCTIONS]

Gentlemen, at this time, I am showing no further questions in the queue. Please continue with any concluding remarks you may have.

Great. Again we want to thank everyone for participating in this call.

Let me remind you again that this call is available through November 10th on playback and for one year on our website. The announcement carries instructions on listening to the playback.

You can also call the contacts listed on our news release. Those on the call who are financial analysts, please call Bruce Steinke. Media should call Tim Fox. Numbers for both are on the news release. Again, thanks for dialing in.

Ladies and gentlemen, this does conclude Ameren Corporation third quarter 2006 earnings conference call. You may now disconnect and thank you for using ATT Teleconferencing.