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Meghan Schiller/ MEDILL

Warm winter temperatures and one-time fees caused a dramatic drop in Ameren's fourth-quarter earnings.

Weak demand and sunshine melt Ameren earnings

by Meghan Schiller
Feb 23, 2012

Mild temperatures are the enemy of utility companies, and Ameren Corp. is no exception. On Thursday, the St. Louis company reported that fourth-quarter earnings fell dramatically, reflecting the negative effects of low power prices and the fiscal drag of one-time charges.

As people in the Midwest enjoy unusually high winter temperatures, in other words, low demand for power is the result.

Net income for the Midwest utility holding company declined 52 percent to $25 million, or 10 cents per diluted share, from $52 million, or 21 cents per diluted share. Revenues dropped 7.5 percent to $1.58 billion from $1.71 billion in the year ago quarter. 

The latest quarter included a variety of one-time charges including goodwill writedowns, a voluntary retirement offer and other costs.  The company, which provides energy services to customers in Missouri and Illinois, said excluding these charges it recorded 14 cents earnings per share, only one penny short of analysts’ expectations.

“Continued disciplined cost management allowed us to offset the negative impact on sales of much warmer-than-normal fourth-quarter winter temperatures,” said Thomas R. Voss, CEO.

Despite slow moves toward utility deregulation, Illinois and Missouri regulators still control the pricing that Ameren passes on to its customers.

“Ameren still operates in the two of the most challenging regulatory jurisdictions in the country and we expect that the company will continue to struggle to reduce regulatory lag, grow its rate base, and earn its allowed returns on equity,” said analyst Travis Miller, Morningstar Inc. “As a result, we think that income seeking investors are better suited looking elsewhere for opportunities in the diversified utilities space.”

Low electric and natural gas prices, as well as warmer winter temperatures, led to the decrease in earnings. Those in the market believe power prices will remain depressed, continuing to hurt earnings of companies in the industry.

But company officials expect the clouds will clear, saying they will jump on any opportunity to market and sell power, specifically to municipal customers in Illinois. Municipalities in that state will soon be able to buy power on behalf of residents from whatever provider they choose.

“We’re always looking at sales opportunities as they present themselves,” said Marty Lyons, CFO. “We’ve talked about our strategy of going after retail customers and you have to act on those when they are available in the market and they arise from time-to-time, and we execute on those.”

Locally, the Ameren Illinois segment reported earnings of $193 million, compared to $208 million the year earlier. These numbers reflect the same factors mentioned above.

Ameren expects more favorable 2012 resultss, with per share earnings between $2.20 and $2.50 per share. That’s in line with current analyst expectations of $2.32 per share.

For the year, 2011 net income rose to $526 million, or $2.15 per diluted share, from $151 million, or 58 cents per diluted share in 2010. Annual revenues increased to $6.53 billion versus $6.52 billion the year earlier.

In New York Stock Exchange trading Thursday, Ameren shares closed up 29 cents to $32.13.