Ameren's First Step for 2012

Ameren Illinois, a subsidiary of Ameren Corporation (AEE">AEE), has filed for the implementation of its Modernization Action Plan (“MAP”) with Illinois Commerce Commission. This marks the first step for the MAP that is aimed to provide customers with an improved, more reliable and modernized electric distribution system.

In December 2011, the company enacted the Energy Infrastructure Modernization Act. This Act is a statewide commitment that follows a formula ratemaking approach and is expected to create more than 2,400 jobs.

The Act calls for an investment of $3 billion over the next 10 years to renovate the state's electric system, and also includes the installation of smart grid. Ameren Illinois is looking forward to executing the new law as its MAP.

The key points of the initial action plan, during filing, include investment of an additional $625 million in the Ameren Illinois electric delivery system over the next 10 years, thus creating 450 new jobs, improving service reliability by using advanced distribution system automation, modernization of electric substations and the installation of new transformers.

The MAP filing is expected to benefit Ameren customers in multiple ways, by reducing the instances and length of electric service outages with the introduction of new technologies. This would help them to exercise greater control over their energy usage and expenditure. The MAP also includes a provision for the imposition of penalties, in case the company fails to meet its goals.

These initiatives indicate that the company has begun focusing on 2012 and beyond. Key growth drivers for the company include consistent performances across its stable utility operations in the Midwestern market, its focus on cost minimization and its strong balance sheet.

However, we are concerned about its predominantly coal-based generation assets and pending regulatory cases. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

St. Louis-based Ameren Corporation is a holding company which engages in the generation and distribution of electricity and natural gas. It caters to residential, commercial, industrial and wholesale end-markets in Missouri and Illinois. Some of its main competitors include CenterPoint Energy, Inc. (CNP">CNP) and Exelon Corporation (EXC">EXC).

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