Ameren Corporation (AEE): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

Summary:
We have reiterated our Neutral recommendation on Ameren Corp. following its fourth-quarter 2013 results. The company's top and bottom lines in the quarter were above expectations and also improved on an annualized basis. This was mainly backed by increased rates for Missouri electric and Illinois transmission service. Importantly, the company exited the merchant generation business during the quarter, which improved the business mix. We expect Ameren to witness modestly rising earnings at its core utilities over the long term, primarily in Illinois. With its predominantly coal-based generation assets and pending regulatory cases, we see limited upside from current levels and expect Ameren's shares to trade in line with the broader market indices.

Overview:

St. Louis based Ameren Corporation AEE is a holding company which generates and distributes electricity and natural gas to residential, commercial, industrial and wholesale end markets in Missouri and Illinois. Through its utility subsidiaries, the company distributes electricity to 2.4 million customers and natural gas to approximately 1 million customers in Missouri and Illinois. Ameren owns electric generating plants with a generating capacity of more than 15,900 MW. Ameren operates in three segments: Missouri Regulated, Illinois Regulated and Non-rate-regulated Generation.

Ameren's principal subsidiaries are Union Electric Company (Ameren Missouri) and Ameren Illinois Company (Ameren Illinois). Ameren Missouri operates a rate-regulated electric generation, transmission and distribution business, and a rate-regulated natural gas transmission and distribution business in Missouri. Ameren Illinois operates a rate-regulated electric and natural gas transmission and distribution business in Illinois.

In Dec 2013, Ameren Corp. closed the sale of its five coal-fired power plants in Illinois to power generator Dynegy Inc. With this sale, the company divested its merchant generation business, Ameren Energy Resources Company ("AER"). In Mar 2013, the company had announced its intention to sell the following power plants, namely, the 410 megawatt MW Duck Creek plant, 650 MW E D Edwards plant, 895 MW Coffeen plant, 1,197 MW Newton plant and 1,002 MW Joppa coal plant.

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