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Ameren Corporation (AEE - Analyst Report) reported stable second quarter 2012 results. During the quarter, pro forma earnings per share were 73 cents, beating the Zacks Consensus Estimate of 60 cents. Pro forma earnings were also higher than the year-ago figure of 59 cents.
The increase in year-over-year results reflect increased earnings from regulated utility operations partially offset by decreased earnings from merchant generation operations.
During the quarter, GAAP earnings per share were 87 cents compared with earnings per share of 57 cents in the year-ago period. The significant variation of 14 cents per share between GAAP and pro forma earnings was due to the reduction of tax benefit of 18 cents and a 4 cents loss on net unrealized mark-to-market activity.
In the reported quarter, net revenues declined 6.8% to $1.7 billion in-line versus the Zacks Consensus Estimate. Revenue from Electric sales was down 6.3% year over year to $1.5 billion, while revenue from Gas declined 12% year over year to $147 million.
Ameren Missouri: During the quarter, the segment reported GAAP and pro forma earnings of $143 million, compared to $90 million in the year-ago period. The increase in earnings reflected a favorable Federal Energy Regulatory Commission (FERC) order related to a disputed power purchase agreement; the absence of a charge related to the fuel adjustment clause; and new electric rates.
Other factors having a favorable effect on second quarter 2012 earnings included an increase in kilowatthour sales to native load customers due to warmer temperatures, and reduced storm-related costs. The positive effects of the above factors were partially offset by increased depreciation and amortization expense.
Ameren Illinois: During the quarter, the segment reported GAAP earnings of $32 million, compared to earnings of $37 million in the year-ago period. Pro forma earnings were $33 million, compared to year-ago earnings of $37 million. The decrease in pro forma earnings in the second quarter of 2012 reflected increased reliability spending, excluding storm-related costs, and higher other taxes.
The negative effects of the above factors were partially offset by new natural gas delivery rates effective in January 2012, an increase in kilowatt-hour sales due to warmer temperatures, and lower financing costs. The GAAP earnings comparison was affected by the factors mentioned above and by a $1 million loss from net unrealized mark-to-market activity in the second quarter of 2012.
Merchant Generation: The segment digested GAAP losses of $5 million, compared to second quarter 2011 GAAP earnings of $15 million. Pro forma losses for the second quarter of 2012 were $2 million, compared to year-ago earnings of $20 million. The variance in pro forma performance reflected lower market prices for electricity.
This negative factor was partially offset by reduced plant maintenance costs and depreciation expenses. The GAAP earnings comparison was affected by the factors mentioned above and by a second quarter 2012 non-cash income tax benefit.
At the end of June 30, 2012, Ameren reported cash and cash equivalents of $117 million compared with $378 million in the year-ago period. As of June 30, 2012, long-term debt, net remained flat at $6.7 billion versus year-end 2011.
During the first half of 2012, net cash provided by operating activities was $805 million compared with $899 million at the end of the year-ago period. Capital expenditure in the first half of 2012 was $565 million, up from $507 million the comparable year-ago period.
Ameren raised its pro forma earnings guidance range for full-year 2012 to a range of $2.25 – $2.55 per share, compared to the prior range of $2.20 – $2.50 per share. GAAP earnings are now expected to be in the range of $0.70 – $1.00 per share, compared to the prior range of $0.65 – $0.95 per share.
Ameren’s stable and regulated electric power operations in the Midwest generate a relatively stable and growing earnings stream. We expect future growth to be driven by improved plant operations, focus on cost management, rate relief and installation of emissions reduction equipment (scrubbers) at its generation plants.
However, the company is negatively impacted by the impairment charges related to Ameren Energy Resources Generating Company's Duck Creek Energy Center.
Also, its predominantly coal-based generation assets and pending regulatory cases are a matter of concern. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock. This is in-line with Illinois utility Exelon Corporation (EXC - Analyst Report).
St. Louis-based Ameren Corporation is a holding company which engages in the generation and distribution of electricity and natural gas and serves residential, commercial, industrial and wholesale end-markets in Missouri and Illinois.
With a generating capacity of 15,900 megawatts, the company, through its subsidiaries, serves 2.4 million electric customers and more than 0.9 million natural gas customers in a 64,000-square-mile area.