Ameren to defer up to $1 billion of 2009 spending
Ameren Corp. may halt construction of pollution controls at a St. Charles County power plant as part of a broader plan to defer up to $1 billion of 2009 capital and operating expenses in response to the ongoing turmoil in the financial markets.
The budget cuts come as St. Louis-based Ameren grapples with a weakening economy that has depressed wholesale electricity prices and the global credit crisis that has made it more difficult and expensive for it and other companies to borrow.
"These events have (affected) our company and we believe they will continue to (affect) us throughout 2009 and perhaps longer," Chief Executive Gary L. Rainwater said on a conference call with analysts and investors.
Plans call for deferring $400 million to $500 million in capital and operating expenses at the company’s wholesale power unit. The cuts will be accomplished, in part, by delaying maintenance on power plants. That also will allow Ameren to run the plants more and generate additional revenue.
Ameren also said it has identified $400 million to $500 million of capital expenditures that could be deferred in its regulated utility businesses in Illinois and Missouri. Included in those costs is at least one big-ticket item: the installation of emissions controls at the Sioux coal-fired plant in St. Charles County.
The company’s Missouri utility, AmerenUE, began the $500 million project to install scrubbers at its 32-year-old Sioux plant last year to help meet more stringent federal air quality regulations — rules overturned by a federal appellate court judge this year. The project also was part of the utility’s $1 billion Power On initiative.
Ameren officials are considering stopping construction at Sioux. If that decision is made, the utility would continue engineering work and pick up the project at an undetermined date, Rainwater said.
The company also is contemplating a third step to reduce capital spending in the coming years. Ameren said it will seek authority from the Illinois Pollution Control Board to delay the installation of scrubbers at some coal-fired power plants in the state no fax pay day loan. Doing so would let the company defer an additional $500 million of expenditures between 2009 and 2012.
Ameren said the Illinois Environmental Protection Agency has agreed not to challenge the application to the Pollution Control Board. In exchange, Ameren has ensured the Illinois EPA that project deferrals won’t increase emissions of sulfur dioxide and nitrogen oxides during the next decade. Basically, Ameren will delay pollution reductions, but make deeper cuts in later years.
"We believe these steps are simply prudent actions made during these uncertain and volatile capital market conditions," Chief Financial Officer Warner Baxter told analysts and investors.
Ameren isn’t the only utility with plans to cut spending, said Mark Barnett, a utility analyst at Morningstar in Chicago. Just last week, Florida utility owner FPL Group Inc. announced plans to cut 2009 capital spending by $1.7 billion, including the deferral of 400 megawatts of wind energy projects.
"The issue is industrywide," said Mark Barnett. "When the cost of borrowing significantly increases, utilities struggle because their business is so capital intensive."
Ameren announced plans to curtail 2009 capital spending as the company reported a 16 percent drop in third-quarter profit, reflecting milder summer weather and increased fuel costs.
Baxter said Ameren had $1.45 billion of cash and available liquidity at the end of October, up about $550 million from the same time last year. He said the company has no significant near-term debt maturities and isn’t actively considering changes to the dividend.
"We can’t guarantee any future dividend levels, but, as you know, that’s an important aspect of our investment profile and we will continue to be mindful of that," he said.
jtomich@post-dispatch.com | 314-340-8320
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