阿莫林 (AEE) 2008 Q3 法說會逐字稿

Good morning ladies and gentlemen, and thank you for standing by. Welcome to the Ameren Corporation 2008 third quarter earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (OPERATOR INSTRUCTIONS) This conference is being recorded today, Tuesday, November 4th, 2008. I would now like to turn the conference over to Doug Fischer.

Thank you, and good morning. I am Doug Fischer, Direct or of Investor Relations for Ameren Corporation. On the call with me today is our Chairman, President, and Chief Executive Officer, Gary Rainwater; our Executive Vice President and Chief Financial Officer, Warner Baxter; our Senior Vice President and Chief Accounting Officer, Marty Lyons; our Vice President and Treasurer, Jerre Birdsong; and other members of the Ameren management team.

Before we begin, let me cover a few administrative details. This call will be available by telephone for one week to anyone who wishes to hear it by dialing a play back number. The announcement you received in our news release carried 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 statements, we ask you to read the Forward-Looking Statements section in the news release we issued today, and the Forward-Looking Statements and Risk Factor sections in our periodic filings with the SEC.

To assist in our call this morning, we have posted presentation slides on our website that we will refer to during this call. To access this presentation, you may look in the Investor section of our website under Presentation, or follow the links for the webcast. Gary will begin the call with an overview of key third quarter 2008 operations and regulatory developments, as well as comments on the current volatility in the financial markets and our strategies to address this issue. Warner will follow with a discussion of our third quarter 2008 financial results and revised 2008 earnings guidance, as well as provide some more detailed comments on our available liquidity and other issues related to the current financial markets. We will then open the call for questions. Here is Gary.

Thanks, Doug. Good morning, and thank you for joining us. This morning, we reported non-GAAP or core earnings per share of $1.17 per share for the third quarter of 2008, down from a $1.33 we earned in the same period in 2007. The fact that earnings declined from the year ago quarter was not a surprise, given last year's very hot summer weather which drove higher electric margins in the 2007 period. In addition, as we previously discussed with you in 2008, we expected rising costs for, among other things, fuel and enhancements to distribution system reliability. However, the magnitude of the decline was somewhat greater than expected because of weaker than expected power prices and milder than normal weather this quarter.

As you all know, we have seen tremendous volatility in power prices this year, and more recently, meaningful downward pressure on these prices. Lower power prices in the mild third quarter weather are the primary reasons we narrowed our core earnings guidance range for 2008 to $2.80 to $3 per share, which is in the lower half of our previous guidance range of $2.80 to $3.20 per share. Warner will go through these items in more details in his remarks.

Turning now to some key regulatory developments. In September, we received a rate order in Illinois. Specifically on September 24th, the Illinois Commerce Commission, or ICC, authorized increases in rates for AmerenCIPS, AmerenCILCO, and AmerenIP, totaling approximately $161 million, based on allowed returns on equity of 10.65% for electric delivery service, and 10.68% for gas delivery service, and common equity ratios ranging from approximately 47% to 52%. These increases were about 78% of our updated 2007 $207 million request.

Because the Ameren Illinois Utilities pledged to limit overall residential electric bill increases to 10% in the first year of new rates, AmerenIP's electric rates will be approximately $10 million lower than the authorized level until October 1, 2009. The ICC approved an increase in the supply cost adjustment, or SCA factors, which is expected to increase electric revenues by another $10 million per year. The SCA change is applied only to bills of customers who take power supply from the Ameren Illinois Utilities, and it covers the increased cost of administering power supply responsibilities.

While the ICC did not accept our gas revenue decoupling proposal, it did approve an increase in the monthly charge for gas residential customers to 80% of fixed delivery service cost, versus the prior 53%. This will make our gas utility earnings less sensitive to volumetric swings. The new Illinois rates went into effect on October 1st. These increased rates will improve the earnings and cash flows of the Ameren Illinois Utilities from their depressed levels. However, we continue to expect that these rates will not keep pace with the level of costs we are currently experiencing. Consequently, we are evaluating the timing of our next rate case filings in Illinois.

As we have said in the past, we expect to file rate cases more frequently in the future, to minimize regulatory lag, as well as to make bill increases more manageable for customers. Importantly, we do consider this rate order a positive sign of the progress that we are making in Illinois to restore financial stability and health to the Ameren Illinois Utilities. Two of the credit rating agencies concurred with this assessment as Standard & Poor's and Fitch recently raised their ratings for our Illinois Utilities. Moody's has our Illinois Utilities on positive outlook as well.

Turning now to Missouri. AmerenUE has requested an annual electric revenue increase of approximately $251 million, due to the higher cost across its business, including fuel and reliability costs, as well as higher infrastructure investments. Critical aspect of this case is AmerenUE's request to implement a fuel and purchase power cost recovery mechanism. On August 28th, the Missouri Public Service Commission staff, the Office of Public Counsel, and interveners, filed their initial recommendations in the case. The staff recommended a $51 million increase, based on a 9.5% return on equity and a 51% equity ratio. Further the Missouri Commission staff did not support a request for a fuel and purchase power cost recovery mechanism.

While each Utility's situation differs, it is worth noting that the Missouri Public Service Commission authorized a 10.8% return on equity for Empire District Electric in late 2008, close to the 10.9% return we have requested in our case. In addition, the Missouri Commission has approved fuel and purchase power cost recovery mechanisms for Aquila and Empire District Electric in the recent past. Of course, each case stands on its own merit; however, we believe we have presented a strong case to the Missouri Public Service Commission on these issues.

As you know, the need for Utilities to have strong cash flows and good credit ratings, solid overall returns on their investments, and the ability to access the credit markets on a timely basis, has never been more apparent than it is right now, as we try to navigate our business through very challenging financial markets. The bottom line is that achieving a constructive outcome in the AmerenUE rate case is critical to our ability to continue to invest in our Missouri infrastructure, so that we will be able to meet our customers' expectations for safe and reliable service, access the credit markets to finance our operations, as well as provide solid returns to our shareholders. Hearings run from mid-November through early December, and an order is expected from the Missouri Commission in late January or early February 2009, with new rates effective March 1st.

Moving on, I am very pleased to say that we have good news to report on the operations front. In October, our Callaway Nuclear Plant completed its first ever breaker to breaker run. This means the plant operated from one re-fueling to the next without ever being out of service. Callaway was on line for 520 days.

The plant is one of only 26 in the nation's 104 nuclear units to achieve a record run of more than 500 days. We are proud of Callaway's achievements. The unit is now undergoing its scheduled refueling and maintenance outage. The outage is expected to take approximately 25 to 30 days, and we expect the unit to be on line later this week.

We also have good news on the cold-fired plant generation front. Our non-rate regulated coal-fired units turned in solid performance this quarter, with equivalent availability rising about 5%, to approximately 89%, compared to the third quarter of 2007.

Now, I would like to discuss with you our perspectives on the capital and credit markets, as well as the current economic environment we are experiencing and the related impacts on our business. As you know, the global financial markets have experienced extreme volatility and disruption in 2008, and in particular, since early September. This disruption has led to major financial institutions coming under financial duress, significant strains in the capital and credit markets, deteriorating global economic conditions, and steep declines in stock prices.

The United States government and governments around the world have established programs aimed at strengthening the global financial system. We are encouraged by these efforts, and we believe that, in time, these efforts will benefit the financial markets. However, in the interim, these events have impacted our Company, and we believe they will continue to impact us throughout 2009 and perhaps longer.

In terms of the economy, we believe the disruption in the capital and credit markets will further weaken economic conditions, as the more limited access to credit and the higher cost of capital to business will reduce spending, resulting in job losses and pressuring economic growing. These weak economic conditions could lead to lower sales and higher bad debt expenses for us, among other things.

In terms of sales growth, we have historically targeted a modest overall electric growth rate of 1.25% annually. For the nine months ending September, our weather sensitive and commercial electric sales were down 5% am and 3% respectively, compared to the year ago period. However, these decreases were driven by the milder summer weather this quarter, compared to our very hot summer last year. After adjusting for weather, our combined residential and commercial electrical sales increased approximately 1% for the first nine months of 2008, compared to the year ago period.

Separately, our industrial sales were down about 4% for the first nine months of 2008, compared to the year ago period, reflecting the soft economy. While these lower sales have had minimal impact on our operations so far in 2008, it is a situation that we will continue to closely monitor.

With regard to the extreme disruption in the capital and credit markets, we believe this has made our ability to access the capital and credit markets to support our operations and refinance short term debt more challenging. To navigate through these markets, we are proactively managing our finances, while remaining sharply focused on continuing to provide our customers with safe and reliable electric service, as well as comply with federal and state environmental reliability and other regulations. In October 31st, 2008, our available liquidity, which represents our cash on hand and amounts available under our credit facilities, stood at approximately $1.45 billion. That is up about $550 million from the same time last year.

Despite this solid available liquidity, we have identified opportunities in our developing contingency plans that would defer or reduce planned capital spending and operating expenses to reduce our financing needs in these uncertain markets. Specifically, we are reducing expected 2009 operating and capital expenditures in the non-rate regulated generation business segment by a total of $400 million to $500 million. Other meaningful cost deferral and reduction opportunities have been identified throughout the rest our business, that we will execute in the event that the capital and credit markets continue to be disrupted.

In our regulated businesses, in administrative support functions, we have identified approximately $400 million to $500 million of planned 2009 expenditures, which may be deferred into future periods. These expenditures are primarily capital, primarily generation related, and are discretionary.

Separately, because the Federal Clean Air Interstate and Mercury rules were vacated by the courts, we are seeking a variance from the Illinois Pollution Control Board to an environmental requirement in Illinois, for our non-rate regulated generation business. In preparing this request, we worked with the Illinois EPA and agreed to some additional emission rate reductions, make the variance proposal environmentally neutral. As a result, the Agency has indicated they will not oppose the variance. This variance would allow us to defer approximately $500 million of environmental capital expenditures that were scheduled in the 2009 to 2012 time frame.

Warner will go into some more detail on these matters in a moment. However, the important point, is that we are proactively taking prudent actions to modify our short term plans to address the current economic and financial market uncertainties. It is important to note that any expenditure control initiatives would be balanced against our continued long term commitment to invest in our energy infrastructure, to provide safe, reliable service to our customers, to meet federal and state environmental liability and other regulations, and the need to maintain a solid overall liquidity and credit profile to meet our operating capital and financing needs.

To wrap up, our management team remains very focused on successfully navigating our Company through the current challenging market and economic conditions, and executing the long term strategic plan for the benefit of our customers, as well as to enhance shareholder value above current depressed levels, which I believe do not reflect the strong underlying value of our Company. I will now turn it over to Warner to discuss in more detail our third quarter results, as well as our current available liquidity position and future plans.

Thanks, Gary. I would now like to refer you to the slide presentation on our website that Doug mentioned, as I provide a more detailed discussion from our third quarter 2008 earnings. Turning first to page three of our slide presentation, today we announced third quarter 2008 net income in accordance with generally accepted accounting principles of $204 million or $0.97 per share, compared to third quarter of 2007 GAAP net income of $244 million or $1.18 per share. Excluding certain items in each year, Ameren recorded 2008 core for non-GAAP net income of $246 million or $1.17 per share, compared to third quarter 2007 core net income of $277 million, or $1.33 per share. We recorded several significant items in the third quarter of 2008 that we have excluded from our core earnings.

Net unrealized mark to market losses from non-qualifying hedges reduced third quarter 2008 net income by $0.17 per share, as compared to net unrealized gains of $0.03 per share in the third quarter of 2007. These unrealized mark to market losses in the third quarter were primarily driven by a decline in the value of heating oil option contracts, as well as a decline in the cash surrender value of Company-owned life insurance policies, offset in part by unrealized mark to market gains related to power sales contract.

As you know, we are utilizing heating oil option contracts to hedge the volatility of diesel fuel price adjustments, and better than coal transportation contracts for the period 2008 through 2012. The value of these non-qualifying hedges will vary over time, based on then-current market prices. As you may recall we had significant gains earlier in the year. Of course, in the long run, a decline in diesel fuel prices was beneficial for our Company.

Continuing with non-ore items, net cost associated with the Illinois Comprehensive Electric Rate Relief and Customer Assistance Settlement, an agreement reached in 2007, reduced GAAP earnings by $0.03 per share in third quarter of 2008, and $0.18 per share in the third quarter of 2007. As Gary said earlier our core earnings per share in the third quarter of 2008 are lower than core earnings per share in the same period in 2007. The negative impacts of milder summer weather, higher fuel prices, and increased spending on utility distribution system reliability among other things, more than offset the positive impacts of higher electric margins from our non-rate regulated generation operations, and the timing benefit of seasonally redesigned electric rates in Illinois.

To continue on slide three of the presentation, and focusing only on some of the more significant items, the effective seasonally redesigned rates in Illinois raised earnings by $0.11 per share, compared to the prior year period.. You may recall that, in late 2007, the Illinois Commerce Commission authorized redesigned electric rates, to reduce seasonal fluctuations for residential customers who use electricity to heat their homes. Over the course of the full year, this rate redesign is not expected to have any net impact on earnings.

Other electric and gas margins increased $0.16 per share in the third quarter of 2008, compared to the prior year period, primarily as a result of higher realized electric margins. The higher margins were primarily driven by the solid performance of our non-rate regulated generating units, and their equivalent availability rose 89%, up 5% from last year's third quarter. Mild summer weather had a significant impact on the third quarter, reducing earnings by an estimated $0.18 per share, compared to the prior year period. Cooling degree days in the third quarter of 2008 were 27% below those in the third quarter of 2007, and 6% below normal.

We also continue to experience higher costs for fuel and related transportation, which reduced third quarter 2008 earnings by $0.08 per share, compared to the prior year period. Distribution system reliability expenditures reduced earnings by $0.06 per share in the third quarter of 2008, compared to the year-ago period. We continue to make significant incremental investments to improve reliability and customer satisfaction. Bad debts, depreciation, and amortization, financing, and other expenses also increased year over year in the quarter.

Before I move on to an update of full year 2008 earnings guidance, I would like to remind you of a few factors that will impact fourth quarter results. As we discussed earlier, our Callaway Nuclear Plant is in the midst of a refueling and maintenance outage. We estimate that the cost of the outage will reduce fourth quarter 2008 earnings by approximately $0.10 per share, versus the fourth quarter of 2007. In addition, as we previously disclosed, the seasonally redesigned electric rates in Illinois are expected to reduce fourth quarter 2008 earnings by $0.05 per share, versus the prior year quarter.

Of course power prices remain volatile. However, our exposure to changing market prices for the rest of the year is mitigated in part by the fact that we have hedged all but approximately 2.5 million mega-watt hours for Company-wide expected fourth quarter generation.

Moving on to our 2008 guidance on slide four, as we stated in the news release this morning, we now expect our core earnings to be in the range of $2.80 to $3.00 per share, which represents a narrowing of our guidance range. Revised guidance takes into account the mild summer weather and lower than expected power prices in the second half of the year. Our prior guidance range was $2.80 to $3.20 per share.

On our second quarter earnings conference call, we stated that the then recent significant declines in power prices, should they persist, could have meaningful impacts on our financial results for 2008 and beyond. We have expected to see modest strengthening in power prices, as we move through the summer cooling and tropical storm seasons. The expected strengthening in 2008 power prices has not materialized, due, in part, to generally mild summer weather and the impact of the economic slow down and commodity prices, including the price of natural gas which impacts power prices.

We also adjusted our expectation for 2008 GAAP earnings in the range of $2.80 to $3.00 per share, versus our previous estimate of $2.80 to $3.20 a share. Our GAAP earnings guidance includes the estimated $0.12 per share negative impact of the Illinois Comprehensive Rate Release and Customer Assistance Settlement Agreements, the $0.08 per share benefit from the Cold Contract Settlement, related to expected 2009 costs, and the $0.04 per share positive impact of the Missouri Storm Accounting Order. Any net on realized mark to market gains or losses on Pact GAAP earnings, but are excluded from our GAAP and core earnings guidance, as the Company is unable to reasonably estimate the impact of any gains or losses due to the volatility of the markets.

On page five of our slide presentation, we have also updated our core earnings guidance by segment. Ameren's consolidated and segment guidance for 2008 assumes normal weather and is subject to, among other things, regulatory decisions and legislative actions, plant operations, energy and capital market conditions, severe storms, unusual or otherwise unexpected gains or losses, and other risks and uncertainties outlined or referred in the Forward-Looking Statements section of our news release.

Next, I would like to continue our discussion of the current capital and credit markets, as well as the weak economic environment, related implications for our business, and our plan to address these issues. Gary discussed earlier the impact that economic conditions had on our customer sales. Another area we are closely monitoring is bad debt expense. This year, we have seen bad debt expenses rise, most notably in our Illinois regulated operations.

While it is too early to predict how the weakened economy will impact our future bad debt expenses, we continue to proactively work with our customers and local agencies to help develop payment plans for our customers who are in need of assistance. In addition, as you well know, the deteriorating global economic conditions have had a severe impact on financial markets worldwide. This has resulted in sharp decreases in the value of the investment portfolios of many pension and post-retirement benefit plans, including ours.

We continue to assess the impact of these poor investment returns, as well as changing discount rates, that have on our future benefits expenses, and funding requirements. However, it is important to note that we currently have a pension and post retirement benefit plan tracking mechanism in Missouri, that would mitigate any potential increases in expenses. Further, we expect our pension and post-retirement benefit funding levels in 2009 to be consistent with our expenses for our regulated operations; however, we do not anticipate any meaningful, minimum required funding in accordance with [ARISA] in 2009.

Next, in turning to slide six of our presentation, I would like to discuss our current available liquidity position. At October 1, 2008, our available liquidity under our existing credit facilities, coupled with cash on hand, approximated a solid $1.45 billion. As Gary noted earlier, our available liquidity position has improved meaningfully since this time last year, and is consistent with our plan to enhance financial flexibility during these challenging markets.

In addition, our available liquidity improved from September 30. We were able to access the long-term debt markets in October, and complete a $400 million senior-secured financing for AmerenIP. While the interest rate we will pay for this debt is certainly higher than we've seen for some time, key point is that we were prepared and able to access the credit markets to reduce our short term borrowings and finance our operations. One of our key strategies going forward is to have the necessary regulatory approvals and financing documents prepared well in advance of planned financings, maximize our flexibility to access the choppy markets. Importantly, we continue to believe that we will be able to access the capital markets, especially for our regulated utility operations.

As we look ahead to the end of 2008, we now expect our full year negative free-cash flow amount to approximate $1 billion, a meaningful improvement from the estimates we provided you earlier this year. This improvement in our cash flows is being driven by lower than expected capital expenditures of approximately $150 million, as well as increased funds from operation. The expected higher funds from operations is due to several factors, including the Coal Contract settlement payment we received earlier this year, related to the 2009 expenditures, deferred tax benefits, and other working capital improvements. Consequently, we expect our available liquidity to remain solid through year end, and throughout 2009, as we strategically access the capital markets, and access the plans that Gary laid out a bit earlier.

On slide seven, we list our 2008 and 2009 debt maturities. It is important to note that we have rather modest debt maturities through the end of 2009. Regarding our existing credit facilities, $1 billion does not expire until January 2010, and $1.15 billion does not expire until July 2010. As noted on the previous slide, the size of our facilities was effectively reduced by $121 million, due to the Lehman bankruptcy filing. In total, 18 banks, including the Lehman subsidiary, participate in these facilities, with no one institution providing over 11% of the total credit under these facilities. As you would expect we are actively developing plans and strategies to renew these facilities prior to their expiration dates.

While we are proactively managing our financing plans and strategies, we are also taking a hard look at what we can do to manage our capital and operating expenditures to address the significant level of uncertainties in the capital and credit markets. As Gary mentioned earlier, we are already executing on plans to reduce our 2009 operating and capital expenditures, and our non-rate regulated generation business, by a total of $400 million to $500 million. Our planned 2009 operating and capital expenditures are now expected to be $300 million to $400 million below 2008 levels for this business. Many of these expenditure reductions result from changes in planned outage schedules which we expect to result in approximately three million mega-watt hours of additional generation from the estimate that we provided to you earlier this year.

We expect that this additional generation will provide an incremental $60 million to $70 million of electric margins in 2009, using today's market place. Importantly, do not expect they these expenditure reductions will impact our ability to meet the Illinois Environmental Regulations. We have also already taken steps that could allow us to defer $500 million in capital expenditures in our non-rate regulated generation business that were scheduled in the 2009 to 2012 time period, and periods beyond 2012.

In addition, we have identified further meaningful expenditure reductions throughout the rest of our business. As Gary mentioned, we have identified $400 million to $500 million primary discretionary capital expenditures in our regulated businesses, and administrative support functions, that were originally scheduled for 2009, which may be deferred to future periods. These capital expenditure reductions would also be $400 million to $500 million below 2008 levels. These reduction initiatives are primarily generation related, and include projects such as the scrubbers at our Sioux Power Plant. In addition we are reviewing information systems related projects, among other things. We expect to take action on many of these initiatives, in anticipation that the turbulent capital market conditions will persist through 2009. We will finalize our plans for these areas later this year or early next year.

As a result, we believe we have the ability to execute on plans across our Company, that would reduce our expected operating and capital expenditures by approximately $1 billion in 2009, in the event the capital and credit markets continue to be disrupted.. While significant, we believe these steps are simply prudent actions to take during these uncertain and volatile capital market conditions. Importantly, and as Gary said earlier, we will carefully balance any expenditure control initiatives against our continued long-term commitment to invest our energy infrastructure, to provide safe, reliable, electric and gas delivery service to our customers, meet federal and state environmental, reliability, and other regulations, and the need to maintain a solid overall liquidity, and credit ratings profile to meet our operating, capital, and financing needs.

In closing we believe that capital and credit market conditions are likely to improve gradually over time. But we expect that these markets will remain challenging throughout 2009 and potentially longer. We have plans to strategically access the capital markets through 2009 from out of our borrowings under our credit facilities, who assist in funding our capital expenditures, meet scheduled maturities, and maintain solid available liquidity levels. We are executing on plans that we believe will materially reduce cash out flows for operating and capital expenditures in our non-rate regulated generation business, and we have identified opportunities across the rest of our business, which we believe will result in further, meaningful expenditure reductions in 2009.

The bottom line is that we are going to proactively manage all aspects of our business in a prudent fashion, during these unprecedented times for the benefit of all of our stakeholders, including our customers, employees, and shareholders. We look forward to meeting you all at the EEI Financial Conference in Phoenix, Arizona, on November 9 through 11. This completes my prepared remarks. We will now be happy to take your questions.

(OPERATOR INSTRUCTIONS) One moment please. Our first question comes from Greg Gordon with Citigroup. Thanks, and good morning gentlemen.

Not to beat a dead horse, because I know you reiterated it several times. You have already identified $400 million to $500 million of capital and O&M cuts at the non-regulated businesses, correct?

Correct.

I was hopping back and forth to another call. Did you break out how much of that is capital, versus how much of that is O&M?

I have not, but I'll give that to you now. In terms of the unregulated business, and again, this is related to 2009 expected spend, that of the $400 to $500 million, we estimate that the O&M piece of that is $50 million to $100 million, and that the capital piece ranges from $350 million to $400 million.

Are these deferments of necessary expenditures, where you have flexibility on timing, or are these expenditures that can be permanently shelved if economic conditions don't improve?

Certainly, the majority of these are deferments that we have some flexibility in terms of timing, but as we recalibrate our plans, certainly some of these expenditures could be reduced for some period of time. And that piece is still under review, but it is a deferment, as well as a potential reduction in future spending.

What is the total targeted megawatt hour production in deregulated business for 2009, with the three million megawatt hours added, how much total are you expecting now?

I think, in general, as we went into the beginning of the year, Greg, we expected their generation levels to be around 30 million or so, with this additional three, we expect it to be 33 to 34 million megawatt hours.

The 400 to 500 million that you are contemplating potentially deferring or cutting at the regulated businesses, should I assume that there is a similar percentage break down of operating versus capital costs as you identified at the Genco?

No, in terms of those numbers, Greg, we mentioned, those were primarily capital, versus the other had a more meaningful Op O&M component to it. The numbers I gave they were primarily capital on the regulated businesses.

Thank you. You said on the pension that Missouri has a tracker. I would presume that Missouri is the vast majority, maybe it's the wrong presumption, but is the vast majority of your pension expenses. What percentage of pension is in Missouri versus in other areas where there would be some lagging effect, because you have regulatory lag in Illinois, or where you'd have to manage it because it's at Genco?

Sure. In Missouri, I would estimate about half, little more. Halfish roughly, is the pension and post-retirement benefits for that regulated business.

How much in Illinois, versus how much at Genco?

You know, with regard to that specific break down, I am not quite sure. Maybe about 25% would be my estimate, in terms of the Illinois regulated operations with Genco being the other 25%. But that one, we will have to get back to you more specifically on that.

Final question, and you may not be able to answer this on the call. If I think about your analyst presentation you gave in January and the earnings aspirations that you laid out then, how are prices, were higher, Powder River Basin coal prices were lower, at least based on forward curves. So, as we look at generation market pricing today, and we look at Powder River Basin coal prices today, would you still be able to endorse the sort of $4.00 issue earnings power guidance you gave for 2011 today if you were looking at the current forward curves and reassessing that guidance?

You answered a little bit of your own question at the outset. As we sit here today, it's probably difficult to say how all the factors weigh in. And not only do you look at the changes in the power prices, as well as the coal commodity prices, but obviously we're modifying some of our short term spending plans that we laid out in January. And so a lot of things have changed, and so we are in the process of recalibrating all our plans across our entire enterprise, and we'll be able to give you a better look at all these things when we come out and talk about our future guidance early next year. I have one more question, I apologize.

If the CapEx cuts and O&M cuts are meaningful, and from my perspective, necessary. You know, the stock is trading frankly at the yield it is trading because of investor concern over whether in the long run a company who is evolved from being a primarily regulated company to a company that has a significant portion of its earnings now coming from the commodity cyclical businesses, and I think there is an I an implicit question as to whether the current dividend policy is the correct policy. Given the capital intensity of the business, the volatility of the cash flows. Can you comment on how you guys are thinking about that? Obviously the CapEx and O&M cuts you've identified create a lot of head room in the short run, but how are you thinking about dividend policy in the long run?

I will answer it in a couple of ways. Number one, as we laid out in January, and as we still sit here today, we see that the primary growth is really going to still come from our regulated business. That's where we are allocating still the majority of our capital that's where we expect to see a growth from our depressed levels up to more appropriate levels in the future. And so, our level of cash flows that have come across our business are going to become more regulated compared to where they are today. At least that's what our expectations are.

Secondly with regard to the how that then impacts the dividend as we discussed in January, we believe that with greater contribution from the regulated businesses from an earnings perspective, as well as from a cash flow perspective, that obviously gives greater comfort in terms of our overall dividend levels. As you point out with the current stock levels, the yield is obviously very high, but the bottom line is as you said, we have created meaningful head room in terms of the capital expenditure reductions that we are making, as well as O&M.

We were mindful of our dividend payout, and as we recalibrate those plans we will continue to be mindful and focused on maintaining a strong dividend for our shareholders. So really, beyond that I think as we've discussed in the past, our policy is to remain focused on that. And we will continue to be. And of course we can't guarantee any future dividend levels,but as you know, that is an important aspect of our investment profile. And we will continue to be mindful of that.

Thank you, Warner.

Thank you, our next question comes from the line of Ashar Khan, SAC Capital Management. Go ahead.

If I look back to what the guidance has provided earlier this year and the changes, nearly all the short fall is coming from the Illinois regulated area. And could you just go over why it is like a $0.20 drag from what you contemplated in the beginning to the present? I just wanted to get a sense as to why the Illinois regulated operations fell apart.

Thanks, Ashar, and I think that's a good point. I would point to really three areas. One, we talked a little bit about this quarter, certainly weather has had a negative impact on the Illinois operations. Two, is we look over the entire year, bad debt expenses are higher than we originally anticipated in Illinois. And thirdly, recall at the beginning of the year, our Illinois regulated operations had a lot of auction rate debt securities, and we went in and refinanced those when those markets became very disruptive.

So if you look at those three pieces and you look at the change in the Illinois earnings profile, those are impacting that. So as we look ahead, while we are, I would suggest, experiencing regulatory lag in terms of bad debt expenses, as well as higher financing costs, as we continue to go in with more frequent rate cases in Illinois, we believe that those increased expenditures will ultimately have the opportunity to recover in the regulatory framework.

Now, let me ask you, in case of the rate case decision that you got recently, is that higher cost of debt and the bad debt expense recovery factored into it, or it was too late to include it into the rate case that was just decided.

It is clearly the latter. They were not factored into the rate case, the higher cost of capital with the refinancing, or the increased bad debt expense that we have incurred this year.

Just wanted, I missed these numbers. What is the free cash [fall] short fall for 2008, it was like 1.455 in the January presentation. What is it expected to be in '08?

We expect it now to be at the end of the year approximately $1 billion.

That's what you expect in '09 as well?

I have not given the specifics for '09 at this point in time. Of course, our free cash flow, I gave you some of the numbers in terms of how they compared to 2008 spinning levels, and clearly if we executed in all those plans, our level of spending from both an O&M and capital standpoint will be meaningfully below 2008 levels.

Then, could you just remind us how much, of this billion is being funded with the drop 401 equity and debt.

Yes, in general.

In '08.

About $100 million a year comes from our drip program.

And the remaining 900 is coming from the debt?

Yes, it is principally debt refinancing. That's correct. Either through the credit facilities or terming it out long term.

And is it fair to say that the debt costs are running about 200 to 250 basis points higher than what was planned? If you look at it, what you just did some bond offerings recently?

Certainly when you look at the most recent offering those debt costs were probably 200 to 300 basis points what we have seen historically. And where they will be prospectively remains to be seen. Certainly, we would expect as we said earlier, that the capital marks will continue to be disrupted, and consequently we expect higher cost of capital still, as we go into 2009.

Thank you.

You're welcome.

Thank you, our next question comes from the line of Yiktat Fung, with Zimmer Lucas, please go ahead.

With regards to the $50 to $100 million decrease in the O&M generation, is that a one time kind of (inaudible), or should we expect it to carry forward into 2010 and 2011.

I think with regard to the O&M, I wouldn't characterize it as necessarily one time O&M. As I said before we are recalibrating all our plans. So we'll have to look at the plans we laid out again in January and see how they effect the plans that we originally expected to take place in 2009, 2010, 2011, and 2021, and how that O&M ultimately rolls through those other years, frankly remains to be seen as we finish our work.

Okay. And the 350 to 400 million other reduction in expenditures, that's related to capital expenditures, how much of that is related to environmental?

Well, we haven't finalized those plans yet in terms of specificity. We certainly pointed out that the most significant environmental project that is going on in the regulated business as it relates to our new Sioux scrubber project. That is a meaningful expenditure that we have there, if you are talking about the regulated businesses. Was that your question on the regulated business?

I was actually talking about the unregulated. But that was my next question.

I obviously anticipated that one. The other ones with regard to the scrubber projects in our Illinois operations, we are going to continue to move forward on those to meet the environmental regulations. Now, we may be moving some of those capital expenditures in terms of what we are spending specifically in 2009 and 2010 a little bit, but the bottom line, we are going to meet those environmental requirements in Illinois.

Now, it just might be one to two year slow down in the implementation of those scrubbers.

I think those numbers in general, when you look at what we have moved out, is probably $50 million to $100 million in terms of those scrubber projects. Now keep in mind, too, the other thing we pointed out, is that we are seeking a variance of an incremental $500 million, that we were seeking to move outside of the 2009, 2012 time frame, are largely incremental with the numbers I just gave you. And we are waiting, and we'll seek approval of that. And while that may not effect 2009, but could have a meaningful effect on 2009 through 2012.

With regard to the Sioux scrubbers, it seems that the bulk of that $400 or $500 million CapEx cut of the regulated businesses, it is really just the scrubber, right?

I wouldn't characterize necessarily the $400 to $500 million the bulk of that project in and of itself. It is a big piece certainly, and in terms of an environmental project, it is clearly the single biggest environmental project that we are doing on the regulated business.

Would that, I guess defer the need for another rate case?

Well, in terms of the rate cases, we are in the middle of our existing rate case in Missouri. And so, I wouldn't necessarily say that these expenditures will impact our future rate case plans. As we said before, we expect to file more frequent rate cases in all of our jurisdictions and so, it is too premature to say that.

Do you have any contracts or anything lined up to build these scrubber contracts, and does it cost anything to cancel these contracts if you have them?

Was your question, do we have contracts to - -

Do you have contracts already set up to build these scrubbers, and does it require you to break these contracts in order to move these scrubbers projects past 2009?

On the Coffeen and Duck Creek scrubbers we are moving forward on those, so we're not effecting the contracts. On the Sioux contract, we do have flexibility in the contract to delay the project. Our plan is to stop construction, complete the engineering of the project, and then when the engineering is 100% complete at some point, come back and complete the project. We haven't determined exactly when that will be.

One last question. You said there was still some power unhedged for 2008 for the fourth quarter. How much was that?

We said that for 2008, what we had, we have not hedged for the remainder of the year is 2.5 million megawatt hours of our generation across the enterprise.

Thank you very much.

Our next question comes from the line of Paul Ridzon with KeyBanc Capital Markets, please go ahead.

When are you going to file in Illinois? Sorry if I missed it. Paul, we have not stated when we are going to file in Illinois at this point in time. We said that we are evaluating when we are going to file our next rate case in Illinois. As you know we just wrapped our last one up just about a months or so ago. We are evaluating that, and we'll take a look at our capital and O&M expenditures, and make a decision on that here some time in the near future..

You gave a lot of opportunities to reduce CapEx. Have you finalized an '09 CapEx number or range yet?

No, Paul, we have not. In terms of the unregulated generation piece of the business, we were clear in terms of the plans that we're moving forward and executing there. We identified several meaningful opportunities in the regulated business. Those plans will be finalized later this year or early next, and we'll be able to give that you when we come out later.

But overall, about 750 to 900 less that your previous, subject to change.

I think when you do that math, what I just gave you, that's right. Below the 2008 levels, relatively speaking, that's right.

And then, I understand that some resurrection of care seems to be a somewhat high legislative priority in Washington, what are you hearing on that front?

Gary, I know you've been closer to some of those things. You want to touch on that?

I have not heard anything on CAIR. The focus today is on the economy and the election, and environmental issues have kind of taken a back seat, and I would not expect any new environmental legislation any time in the near future.

Thank you.

Thank you, our next question comes from the line of Danielle Seitz, with Seitz Research, please go ahead.

I was wondering, regarding possibly your next filing in Illinois, would you ask for an automatic rider on bad debt or is it something you feel is temporary?

Danielle, with regard to the bad debt rider, that is something we have explored in the past, and is something that we continue to look at in terms of future rate case filings. I wouldn't necessarily say that the level of bad debt expense here is one time. It is too early to say at this point in time. We have seen a meaningful increase, and certainly a rider may indeed be appropriate in those circumstances. We have not made a decision on that.

You don't anticipate to have some sort of the, tally at the end of the year to start the year fresh. Can you carry those bad debts for a while?

I guess, Danielle, in term terms of carrying the bad debts, I'm not quite sure I understand. Are they expensive to (inaudible) as they come along, or are you differing some of them. In terms the bad debt expenses we are recognizing those as incurred, and those are reflected in our financial results. And so they are not being deferred. Of course in the next rate case in Illinois, we would seek recovery of these incremental bad debts.

I understand. And just, on the point of financing, did you anticipate that you may have to at the end of the year, you may have to issue equity, or is it something that you think the drip will be sufficient? For the $1 billion financing you are talking about?

That's right. In terms of the overall financing plan as we said in the past, and earlier today, we are taking aggressive actions to do several things. One is certainly to reduce levels of spending to limit the need for incremental financings, or to reduce the level of financings that we have to make across our enterprise during these choppy and turbulent markets. And so, we think those plans certainly go a long way in terms what plans we may have to do in terms of equity are really frankly debt financings. So, we said earlier in the year, we had no plans for the rest of 2008 to issue equity. And to answer your question, we have no plans to issue any additional equity in 2008.

Thank you.

Our next question comes from the line of Michael Lapides Goldman Sachs, please go ahead. Please go ahead.

I apologize if this is rehashing stuff. I want to make sure I understand a handful of things. First of all, what are the major projects you are deferring in 2009, if you are going forward with Duck Creek and Coffeen?

Primarily they are plant maintenance projects that would have been done in 2009 are slipping into 2010, and then we would expect projects that would have been done in 2010 to slip a year into 2011. Kind of moving out the planned maintenance we have on all our large coal units. And on the regulated business side, in addition, the Sioux plant, because CAIR was vacated, we no longer have a requirement to complete the project, so we're going to defer the Sioux plant scrubber project for some time.

Want to make sure. You are saying roughly $400 million of lower CapEx at the non-regulated business. How much lower at the regulated?

Michael. What we said was that the $400 million to $500 million that we quoted earlier, that was primarily all capital expenditures. And so the answer to your question is $400 million to $500 million for the regulated business, and then $350 to $400 million of capital for the unregulated generation business.

But the $400 to $500 million at the regulated is capital, and the number you just quoted on the non-regulated is also capital?

That is correct. Remember, on the O&M side, we also had quoted $50 to $100 million on the unregulated generation business as well.

Okay, so it as net cut of over $750 million of capital for next year?

Well, two things. Number one, we are executing on the plans for the unregulated generation business. Two, we expect to make meaningful reductions in the regulated business, and those plans are to be finalized. And three, when you sum it all up, when you look at both capital, O&M, as well as when you look at the incremental revenues that we may get, the plan looks in excess of close to $1 billion.

Okay. One last item, can you repeat what the expected output megawatt hour output for '09 and is likely to be at the non-regulated coal units?

At this time for 2009 only, we expect it to be about around 33 or 34 million-megawatt hours.

Thank you, guys. Much appreciate it, Warner.

Thank you ladies and gentlemen, if you queued up, we ask that you please limit yourself to one question. In our next question comes from the line of Gregg Orrill, [Bark's Place] Capital.

Thanks very much. I was wondering if back on the CAIR issue, if the delays in spending you are seeking on various projects, how would that be impacted if the Court of Appeals was to reinstate CAIR?

Yes, Gregg, in Illinois, we are subject to a multi pollutant standard legislated by the state. However, we are seeking to defer some of the requirements of that. And as an I said, we have gotten the is support of the Illinois EPA, they will not oppose the deferral up to the Pollution Control Board, but we believe we have a fair chance of getting that requirement slipped.

Okay. Maybe if I could ask one other. As you went through the positive and negative drivers, incremental on the call, what I heard were on the positive side were. You know, additional megawatt hours of generation, as well as some cost cuts. And on the negative side, potential pension increases at Illinois and at the unregulated business, and weakness in the economy. Is it your intention to be guiding up or down on the EBITDA level on this call?

You know, in this particular call, the message simply is to give you some of the key plans that we're moving forward with, end of 2009 to address the issue in the financial markets. Obviously, there are a lot of moving pieces as you just described, including what we hope to is to obviously you not just reduce some of the capital spend to give us greater financial flexibility in the markets. But with regard to 2009, what we've said is that we expect to come out in early 2009, probably in early February, to provide you a more thorough outlook for 2009 and give you the specifics on EBITDA, earnings, and the like.. We are here to give you some of the meaningful pieces of the things we are working on and some of the proactive things we are doing in our business to address these conditions.

Thanks Warner.

I think we have time for one more question. Because we are running overtime. Others have to be moving on to other calls. If there is one more question, we can take it, otherwise we will close out.

The next question comes from Ben Sung, Luminous Management. On the environmental CapEx reduction or deferral that you talked about, you said that you would be taking other steps to make sure your emissions are neutral, was that correct, and if it is, what are the actions you were taking to do that?

Hi, Ben, this is Warner Baxter. We have Chuck Naslund, who is the President and CEO of our unregulated generation, and he could probably give you a little more in terms of those specifics that we are talking about.

As far as keeping emissions neutral, the Illinois EPA is looking at a time frame of 2010 through through 2020, so, it as long time horizon, and basically we adjusted our plan so that over the long time period, we kept our SO2, NOX emissions neutral ton wise, and that was not too difficult to do by tightening up on some of the facilities that we're installing and getting better production out of them.

Got it, thank you.

Thank you and I will turn the call back over to management at this time.

We want to thank you all for participating in the call this morning. Let me remind you again that this call is available through November 11th on play back, 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. One final matter, as we announced on our second quarter call, Doug Fischer is now heading up our Investor Relations group, and Bruce Steinke is focusing on his Controller responsibilities. Financial analyst inquiries should be directed to Doug, rather than Bruce. Media should call Susie Gallagher. Contact numbers are on the news release. Again, thanks for dialing in and we look forward to seeing you down at EEI later this week and early next.

Thank you, ladies and gentlemen. This concludes the Ameren Corporation 2008 third quarter earnings conference call. The phone numbers for the replay are (303)590-3000 or 1-800-405-2236, followed by pass code 11121637 followed by pound. ACT would like to thank you for your participation. You may now disconnect.