Fitch affirms the ratings of Ameren Corp and its
subsidiaries: Union Electric Company (AmerenUE), Ameren Energy
Generating (AmerenGen), Central Illinois Public Service Company
(AmerenCIPS), CILCORP Inc, Central Illinois Light Company (AmerenCIL)
and Illinois Power Company (AmerenIP). A list of ratings follows
below.
The Ratings Outlook for AmerenCIPS is revised to Negative from Stable. The Ratings Outlook for the other companies is Stable.
The ratings of Ameren Corp. take into consideration the strong earnings and cash flow from its regulated utilities and moderate leverage. Ameren also benefits from its cost effective centralized fuel procurement practices and management of generation assets. Concerns exist relating to uncertainty of the regulatory treatment of Ameren's three Illinois utility subsidiaries (discussed in more detail below). Additionally, at this time the company's Missouri subsidiary, AmerenUE, which accounts for roughly one-half of the company's EBITDA, will be going through a financial review during the second quarter of 2006 and expects to file a rate case by July 2006. Fitch cannot predict the outcome of these proceeding, but notes that the regulatory climate in Missouri has improved since the company's most recent rate case settlement in 2002, which decreased rates by $110 million and froze rates through June 30, 2006. Ameren's wholesale generation operations, primarily at AmerenGen and a subsidiary of AmerenCIL, are subject to commodity price risk. However, the credit profiles of both companies are appropriate for the ratings categories and cash from wholesale energy sales are expected to improve as both entities have sizable contracts expiring at the end of 2006 with prices 30% - 40% below current market levels.
AmerenCIPS's Rating Outlook revision to Negative from Stable is based upon the possibility of a less than favorable outcome from a pending distribution rate case, compounded by continued uncertainty relating to the treatment of future purchased power costs. Given these risks, and as AmerenCIPS Debt-to-EBITDA was 3.5 times (x) at March 31, 2006, which is moderately high for the rating category, a reduction in earnings or cash flow could put pressure on ratings. Since AmerenIP and AmerenCIL's financial profiles are strong for their respective rating categories, less than favorable distribution rate orders or moderate levels of energy cost deferral/disallowance may not necessarily result in negative rating actions.
In December 2005 AmerenCIPS, AmerenCIL and AmerenIP filed for increases in distribution rates equivalent to 2%, 11.7% and 12.7% of their respective bundled rates. On April 27, 2006 the Illinois Commerce Commission (ICC) staff recommended rate increases less than one-half of the AmerenIP and AmerenCIL requests as well as an $8 million rate decrease for AmerenCIPS. Additionally, Ameren's Illinois utility companies are currently supplying the power for their standard offer customers under contracts that will terminate at the end of this year. In accordance with Illinois legislation, which mandates open access effective in 2000, rates for native load customers are frozen through 2006 in order to encourage competition. The generation portion of the companies' standard offer rates is to be set through an auction process and passed entirely through to customers in rates beginning January 1, 2007.
The Illinois Governor, the Attorney General (AG) and the Citizens Utility Board (CUB) have contested the implementation of the auction as they contend there isn't a competitive market in Illinois. Ameren indicated that going to a full pass through of generation costs at market prices would cause rates to increase up to 35% for some customers. The Illinois Commerce Commission (ICC) affirmed the auction process in January 2006. The AG and CUB have since appealed the ICC's decision to state court. Ameren has indicated a willingness to structure a phase-in of increased generation costs with the deferral and eventual recovery of these costs in subsequent years. While the outcome of these proceeding is uncertain and purchase power costs disallowances for all three companies are possible, Fitch anticipates that the parties will agree to a phased-in approach with manageable deferral levels and the appropriate subsequent recovery of costs.
Ameren Corp:
-- Issuer Default Rating (IDR) 'A-';
-- Senior unsecured 'A-';
-- Short-term IDR 'F2';
-- Commercial Paper (CP)'F2'.
The Rating Outlook is Stable.
AmerenCIPS:
-- IDR 'BBB+';
-- Senior secured 'A';
-- Senior unsecured 'A-';
-- Preferred Stock 'BBB+' ;
-- Short-term IDR 'F2';
The Rating Outlook is revised to Negative from Stable.
AmerenCIL:
-- IDR 'BBB+';
-- Senior secured 'A';
-- Senior unsecured 'A-';
-- Preferred Stock 'BBB+' ;
-- Short-term IDR 'F2
The Rating Outlook is Stable
CILCORP:
-- IDR 'BBB+';
-- Senior unsecured 'BBB+'.
The Rating Outlook is Stable
AmerenIP:
-- IDR 'BB+';
-- Senior secured 'BBB';
-- Senior unsecured 'BBB-';
-- Preferred Stock 'BB+'.
The Rating Outlook is Stable.
AmerenUE:
-- IDR 'A-';
-- Senior secured 'A+';
-- Senior unsecured 'A';
-- Subordinate Debt 'A-';
-- Preferred Stock 'A-';
-- Short-term IDR 'F1';
-- CP 'F1'.
The Rating Outlook is Stable.
AmerenGen:
-- IDR 'BBB+';
-- Senior unsecured 'BBB+'.
The Rating Outlook is Stable.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
The Ratings Outlook for AmerenCIPS is revised to Negative from Stable. The Ratings Outlook for the other companies is Stable.
The ratings of Ameren Corp. take into consideration the strong earnings and cash flow from its regulated utilities and moderate leverage. Ameren also benefits from its cost effective centralized fuel procurement practices and management of generation assets. Concerns exist relating to uncertainty of the regulatory treatment of Ameren's three Illinois utility subsidiaries (discussed in more detail below). Additionally, at this time the company's Missouri subsidiary, AmerenUE, which accounts for roughly one-half of the company's EBITDA, will be going through a financial review during the second quarter of 2006 and expects to file a rate case by July 2006. Fitch cannot predict the outcome of these proceeding, but notes that the regulatory climate in Missouri has improved since the company's most recent rate case settlement in 2002, which decreased rates by $110 million and froze rates through June 30, 2006. Ameren's wholesale generation operations, primarily at AmerenGen and a subsidiary of AmerenCIL, are subject to commodity price risk. However, the credit profiles of both companies are appropriate for the ratings categories and cash from wholesale energy sales are expected to improve as both entities have sizable contracts expiring at the end of 2006 with prices 30% - 40% below current market levels.
AmerenCIPS's Rating Outlook revision to Negative from Stable is based upon the possibility of a less than favorable outcome from a pending distribution rate case, compounded by continued uncertainty relating to the treatment of future purchased power costs. Given these risks, and as AmerenCIPS Debt-to-EBITDA was 3.5 times (x) at March 31, 2006, which is moderately high for the rating category, a reduction in earnings or cash flow could put pressure on ratings. Since AmerenIP and AmerenCIL's financial profiles are strong for their respective rating categories, less than favorable distribution rate orders or moderate levels of energy cost deferral/disallowance may not necessarily result in negative rating actions.
In December 2005 AmerenCIPS, AmerenCIL and AmerenIP filed for increases in distribution rates equivalent to 2%, 11.7% and 12.7% of their respective bundled rates. On April 27, 2006 the Illinois Commerce Commission (ICC) staff recommended rate increases less than one-half of the AmerenIP and AmerenCIL requests as well as an $8 million rate decrease for AmerenCIPS. Additionally, Ameren's Illinois utility companies are currently supplying the power for their standard offer customers under contracts that will terminate at the end of this year. In accordance with Illinois legislation, which mandates open access effective in 2000, rates for native load customers are frozen through 2006 in order to encourage competition. The generation portion of the companies' standard offer rates is to be set through an auction process and passed entirely through to customers in rates beginning January 1, 2007.
The Illinois Governor, the Attorney General (AG) and the Citizens Utility Board (CUB) have contested the implementation of the auction as they contend there isn't a competitive market in Illinois. Ameren indicated that going to a full pass through of generation costs at market prices would cause rates to increase up to 35% for some customers. The Illinois Commerce Commission (ICC) affirmed the auction process in January 2006. The AG and CUB have since appealed the ICC's decision to state court. Ameren has indicated a willingness to structure a phase-in of increased generation costs with the deferral and eventual recovery of these costs in subsequent years. While the outcome of these proceeding is uncertain and purchase power costs disallowances for all three companies are possible, Fitch anticipates that the parties will agree to a phased-in approach with manageable deferral levels and the appropriate subsequent recovery of costs.
Ameren Corp:
-- Issuer Default Rating (IDR) 'A-';
-- Senior unsecured 'A-';
-- Short-term IDR 'F2';
-- Commercial Paper (CP)'F2'.
The Rating Outlook is Stable.
AmerenCIPS:
-- IDR 'BBB+';
-- Senior secured 'A';
-- Senior unsecured 'A-';
-- Preferred Stock 'BBB+' ;
-- Short-term IDR 'F2';
The Rating Outlook is revised to Negative from Stable.
AmerenCIL:
-- IDR 'BBB+';
-- Senior secured 'A';
-- Senior unsecured 'A-';
-- Preferred Stock 'BBB+' ;
-- Short-term IDR 'F2
The Rating Outlook is Stable
CILCORP:
-- IDR 'BBB+';
-- Senior unsecured 'BBB+'.
The Rating Outlook is Stable
AmerenIP:
-- IDR 'BB+';
-- Senior secured 'BBB';
-- Senior unsecured 'BBB-';
-- Preferred Stock 'BB+'.
The Rating Outlook is Stable.
AmerenUE:
-- IDR 'A-';
-- Senior secured 'A+';
-- Senior unsecured 'A';
-- Subordinate Debt 'A-';
-- Preferred Stock 'A-';
-- Short-term IDR 'F1';
-- CP 'F1'.
The Rating Outlook is Stable.
AmerenGen:
-- IDR 'BBB+';
-- Senior unsecured 'BBB+'.
The Rating Outlook is Stable.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.